Activity-Based Costing

Correct Answer: Reallocate the activities based on the owner's requirements to reflect the actual indirect costs.

The best adjustment would be to 'Reallocate the activities based on the owner's requirements to reflect the actual indirect costs.' This is because of the nature of activity-based costing, where costs are assigned to specific activities. If the owner's requirements have not been factored in and they represent significant indirect costs, it is important to reallocate costs accordingly to align with reality. Ignoring the indirect costs from the owner's requirements could lead to underestimation of the project budget, impacting the project's profitability. Assigning all indirect costs to the 'Electrical Wiring Installation' activity would create a misrepresentation of the costs associated with that specific activity, distorting cost analysis results. Lastly, cancelling the 'Electrical Wiring Installation' activity is not a good option, as this activity is likely critical to the project, and cancelling it could impact project outcomes or delay the project schedule.

Correct Answer: Underestimated indirect cost associated with the 'Materials Procurement' activity.

The best answer is 'Underestimated indirect cost associated with the 'Materials Procurement' activity.' This is because activity-based costing is a method that assigns the cost of each activity in an organization to all products and services according to the actual consumption by each. Therefore, if the activity 'Materials Procurement' is taking much longer and requiring more resources than anticipated, this could be an indication that the indirect costs related to this activity were underestimated. The option 'The direct cost calculations were wrong.' is not likely the best answer because the problem seems to be with time and resources, not the calculation of direct costs. The option 'The 'Materials Procurement' activity is unnecessary.' is not a probable cause because it is not specified that the activity is unnecessary, only that it is taking more time and resources. Finally, the option 'The 'Materials Procurement' activity was overestimated.' is incorrect since the problem is that it's taking longer and requiring more resources than expected, indicating an underestimation, not an overestimation.

Correct Answer: Reallocate the costs based on the actual use of resources in laying the foundation.

The appropriate action using activity-based costing would be to reallocate the costs based on the actual use of resources in laying the foundation. This is because activity-based costing is a method that assigns costs to activities based on their use of resources. Thus, any miscalculations would be corrected by realigning the costs according to actual resource use. On the other hand, increasing the budget may not necessarily address the cause of the cost overruns, and it might complicate budget management for the rest of the project. Ignoring the miscalculations is not advisable as they can potentially escalate, causing bigger issues in later stages of the project. Delaying the project until additional funds become available can be costly and time-consuming, which would negatively impact the project's schedule and possibly its quality.