ACCT2126 Management Accounting and Business Topic 4 – 4 sessions: Product Costing – Overhead Allocation using single or multiple cost drivers Learning Objectives: Building on your prior learning in this course you are required to be able to demonstrate an understanding of: • Product costing systems and product costing methods. • Supporting cost schedules for the Income Statement and their relationship to the income statement for manufacturing and service organisations. • Actual
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(Carl Marx‚ 2009). The conventional cost accounting model ends up with a cost of goods sold based on absorption costing and includes only product costs as defined in financial accounting. Nevertheless‚ weaknesses (including the issue of undercosting and overcosting products) will arise when businesses use traditional costing system. On the other hand‚ activity-based costing calculates the cost based on actual
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Classic Pen 1.) Create an ABC diagram of Classic Pen Company (be sure to include activities‚ cost drivers‚ and cost objects) AND 2.) Determine the activity rates for each of the cost drivers Fringe Benefits $800 Fringe Benefits $4‚000 Fringe Benefits $3‚200 Indirect Labor $2‚000 Indirect Labor $10‚000 Energy‚ Maintenance‚ Machinery $14‚000 Indirect Labor $8‚000 Computer System $2‚000 Computer System $8‚000 10‚000 Machine hrs. 4 Part Admin 150 Production Runs
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Nonmanufacturing costs that are caused by products are not assigned to products. Additionally‚ traditional methods tend to place too much reliance on unit-level allocation bases such as direct labor and machine-hours. This results in overcosting high-volume products and undercosting low-volume products and can lead to mistakes when making decisions. 2. Compute Activity-Based Costing product costs using 1) actual cost driver rates‚ and 2) capacity-based cost driver rates. Which of these approaches is appropriate
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Effect of Value-Added Activity Based Costing and Economic Value Measure and their impact on Process Improvement & Business Profitability Business’ profitability and processes can be greatly improved by implementing a value-added activity based costing (ABC) and economic value measure system. The effects can save a company exponentially with the additional detail ABC information provides. ABC information provides much more accurate information about the costs of existing products and the cost
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receiving dock. Therefore‚ allocating a percentage of these costs based on a single cost driver may make the product seem more or less profitable. (McDowell & Schnider‚ 1999). Therefore‚ traditional cost allocation methods provided a lot of overcosting and undercosting of products or services. The uneven allocation of
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ACTIVITY-BASED MANAGEMENT TRUE/FALSE 1. A top-selling product might actually result in losses for the company. Answer: True Difficulty: 2 Objective: 1 Terms to Learn: product undercosting 2. Companies that undercost products will most likely lose market share. Answer: False Difficulty: 2 Objective: 1 Terms to Learn: product undercosting Companies that overcost products will most likely lose market share. 3. If a company undercosts one of its products‚ then it will overcost at least one of its other
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RAFIC HARIRI UNIVERSITY (RHU) College of Business Administration (CBA) Course Syllabus BFIN 340: Cost Accounting I COURSE INFORMATION Course Code & Title: BFIN 340: Cost Accounting I Credits: 3 credits Prerequisite: BFIN 231 Classroom: H204 Schedule: TTh: 8:00 – 9:15 Term: Fall 2014 INSTRUCTOR INFORMATION Instructor: Rima Hakim Office: Bldg G‚ Room 101-H Office Hours: TTh 9:30 – 11:30‚ Else by appointment Instructor’s Email: hakimrc@rhu.edu.lb Textbook
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ABC case study: Plum Electronics Plum Electronics‚ a division of Berry Corporation‚ manufactures two large-screen television models: the Mammoth‚ which has been produced since 2009 and sells for $990‚ and the Maximum‚ a newer model introduced in early 2011 that sells for $1‚254. Based on the following income statement for the year ended November 30‚ 2013‚ senior management at Berry have decided to concentrate Plum’s marketing resources on the Maximum model and to begin to phase out the Mammoth model
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Multiple Choice Questions 16. Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce. A) low‚ little B) low‚ considerable C) high‚ little D) high‚ considerable 17. Would factory security and assembly
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