Review of Farm Financial Standards Council Model Case

Topics: Cost accounting / Pages: 3 (658 words) / Published: Feb 21st, 2011
Product Costing-Traditional Methods and Activity.
Yes. I do think that this case study with proposed solution will be useful to agricultural enterprises seeking to employ management accounting techniques. I do think so because the study has adopted the new and more efficient way of activity based method of costing products and cost allocation. This method of activity based costing mainly focuses on activities. The ABC method is critical in organizations decision making process. ABC method is an essential accounting equipment that disintegrates details of cost of an organization. The point that the ABC method tries to emphasize is that if such details as this are disintegrated and provide to managers then the managers will be able to make more sound decisions pertaining the organizations costs. In the past managers have been inconvenienced by the fact of lack of such information. In this case study the proposed solution will be useful since the manager and the accounting department will be linked together. This linkage between the manager and the accounting department will be useful because the manager will acquire information that he previously lacked. ABC assigns cost to activities rather than to products or services. This in turn enables resources and overhead cost to be more precisely designated to the products and services that utilize them. The ABC methods entails a lot of advantages to agricultural enterprises, to begin with this agricultural enterprises will be able to price their product more accurately due to the fact that the cost has been carefully examined hence providing the exact pricing of a product. Taking for example, using the traditional costing method, cost incurred by paying of workers salaries was $100 but using ABC method more specification is done. In this case the salaries paid was $40 the person who cleaned the door. If the traditional costing method was to be used to reduce production cost then it would mean that salaries will have to

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