INTRODUCTION 1.1 Understanding of Traditional and Activity-Based Costing System 1 1.2 Company Background 3 1.3 Company History 3 1.4 Company Operation 5 2. TRADITIONAL COSTING SYSTEM 8 3. ACTIVITY-BASED COSTING SYSTEM 9 4. COMPARISON BETWEEN TRADITIONAL AND ACTIVITY-BASED COSTING SYSTEM 11 5. CONCLUSION
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based on volume of production or proportionally to sales revenue. Such approach usually underestimates costs for low-volume products or services and over-estimates costs of high-volume products or services. To avoid such situations Activity Based Costing (ABC) system was developed. ABC system main principle is to identify main activities of the company, group costs of these activities, identify how these activities can be measured and assign costs to products or services though these measures. ABC
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Marvelous Metals Co. ACTIVITY-BASED COSTING and CORPORATE STRATEGY Marvelous Metals Co. specializes in the production and sale of two machine parts: Part 245A and Part 666B. Historically, the profitability of the company has been tied to Part 245A. In the last two years, however, the firm has been facing intense competition, and its sales of this part have dropped. Much of the competition was from foreign sources, and the general manager was convinced that the foreign producers were
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system Holly has been using allocates 90% of overhead costs to the standard cello because 90% of direct labor hours were spent on the standard model. How much overhead was allocated to each of the two models last year? Based on the activity based costing calculations overall overhead allocations are 67% to the Standard Cello, 33% to the Custom Cello. Discuss why this might not be an accurate way to assign overhead costs to products. Holly has 7 categories of overhead for 2 products the lesser
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(a) Characteristics of an organization contributing to the use of activity based techniques Activity Based Costing (ABC) is a costing methodology used to trace overhead costs directly to cost objects, i.e. products, processes, services, or customers. Costs are assigned to specific activities (e.g. engineering, manufacturing or purchasing) based on their use of resources and costs are assigned to cost objects based on their use of activities. ABC recognizes the causal relationship of cost drivers
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Name________________________________________ University of Oregon ACTG 360 Instructor: Kenneth Njoroge SPRING 2012 SAMPLE FINAL EXAM You have 2hrs to complete this final exam. You are allowed to use a single note sheet, no larger than 8.5 by 11 inches, during the exam. This sheet may be typed on both sides in any font size. Any other additional material is strictly prohibited. There are 13 pages in this quiz, including this cover sheet. The pages are photocopied on one side of the
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Introduction Activity-based costing (ABC) is a methodology of costing that recognizes activities in an organization as a whole and then allocates the cost of each activity or transaction with resources to all services and products in accordance to the actual consumption by each of the cost. This model assigns more indirect costs into the direct costs when it is being compared to conventional or traditional costing. According to CIMA (Chartered Institute of Management Accountants), ABC is a medium
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dynamics of costing systems as organizations try to predict those unseen costs that factor so heavily in the success and profitability of a business. The various costing systems are defined with a special emphasis on their ability to accurately predict those costs that are not of the normal operation and production of the company. Recent events in human society have drawn attention to issues that our predecessors could have only dreamed about and would have quickly dismissed. These costing systems are
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about time-driven activity-based costing The straight facts about traditional and time-driven costing methodologies After decades of proven success, activity-based costing (ABC) has come under fire from its earliest and most active proponents. Robert S. Kaplan and others are promoting a “new, innovative, time-driven methodology” that presumably “delivers great improvements to the older systems of 15 years ago.”1 Companies are replacing their current costing solutions to try to get strategic
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market. The first management accounting tools and techniques contribute to the attainment of organizational objective is standard costing. Standard costing is an accounting system designed to properly allocate costs of direct labor, indirect labor, materials, overhead, and selling / general / administrative accounts on a unit basis for the purpose of accurately costing products and the subsequent control of those costs in managing the production, marketing, purchasing, and administrative functions
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