The case study is about John and Mary Farmer who own a total of 1060 acres of planted corn and soybeans corps and are intending to include a managerial accounting system. The couple grows these crops for the cash markets rather than the seed crop or speciality crops. The case…
The proposed solution will prove to be very useful for the agricultural enterprises which mainly aim at employing management accounting techniques (Hicks). Considering the fact that the total ownership is focused on a particular crop which grows for a certain amount of time in a year, it is essential that the cost and profit centres are set up as they would provide the couple with a chance to make more accurate costing as well as improved pricing. This will also help the couple improve the profitability of the farms as well as ensure better management and more informed decision making for the farm. On the whole this will lead to more effective and efficient management of the farm. It is also important to note that the schematic will provide a chance for the developer to all the activities and also recognise the drivers which can be used effectively as the input values for the activity based costing systems.
It is also important to note that including the cost and profit centres solutions will prove to be very beneficial for the company and will also permit the company to very effectively and accurately conduct the costing for the produces. Also the financial statements that have been provided are very helpful and beneficial for the farm to develop and design the management accounting systems and all reports effectively and efficiently. Since the proposed scheme of the relationship between the profit and cost centres are complex, it is essential to note that the possible scheme will prove to be very effective and will also be more beneficial than the basic provides (Beaulieu and Lakra). The fact that the cost centres provide support and assistance to each other has not been considered in the scheme and this leads to unrealistic solution. In a real world scenario, the cost centres will provide support and back up to each other and also in some cases to the profit centres.
According to Business Dictionary Activity Based Costing, “Cost accounting approach ...
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This research dwells on activity based costing and traditional costing. Cost allocation in companies can provide inaccurate information about the profitability of their goods and services. Traditional cost allocation methods allocate overhead cost outlays with the aid of one driver like direct labour hours, direct labour dollars, or machine hours.
This research aims to evaluate and present activity-based costing using an example of Starbucks Company. The opening of the report consists of the application to the company; tradition costing system; a comparison of activity based costing and tradition based system and profitability analysis.
The traditional costing system had been a very common cost accounting system used during the 19th century. This report discusses the rise and the common use of the traditional costing system within many different manufacturing organizations.
Based on the activity based costing (ABC) method, the company should increase the number of department stores, as part of its expansion strategy (Chakraborty, 2004). This is because, unlike the direct simple costing method, the activity based costing (ABC) has a higher level of accuracy.
Activity Based Costing (ABC) is a common procedure normally most of the organizations adopted to determine the price of their products or services. Both indirect and direct costs of manufacturing will be considered while calculating the unit price. This method proved to be an effective way to determine the true cost of a product or service.
Accountants have always paid close attention to costs, since this variable provides a basis that is utilized throughout the entire accounting information system. In a manufacturing firm labor and materials have always been cost
In the case study presented, the activities for the division include manufacturing of the products using similar, expensive and complex molding machines, with each machine producing three product lines.
These are volume related bases’ or cost drivers and this means that some products are being charged for resources that they do not use. The ABC approach requires the identification of specific activities involved in manufacturing each of products XYI, YZT and
Conversely, the traditional method of costing allocates cost at an average rate to all product-based products. The traditional method brings together any price that are indirect in the production and equally implements the costs across the board through employing one applicable cost driver, for instance, the machine hours.
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