How are activities identified in an organization and the process of assignment of cost is used under Activity Based Costing (ABC) system? Explain. Support your answer with numerical examples.
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How are activities identified in an organization and the process of assignment of cost is used under Activity Based Costing (ABC) system? Explain. Support your answer with numerical examples.
A Melbourne-based company Acacia is considering the adoption of an activity-based costing (ABC) system because they suspect that their traditional costing system distorts the product costs. Acacia produces and sells two products A and B. Their traditional costing system uses direct labor hours as the allocation base for manufacturing overhead cost. Additional information: Product A Product B Direct materials (DM) $38 per unit $28 per unit Direct labor (DL) $24 per unit $12 per unit Units produced 50,000 units 200,000...
Discuss briefly the activity-based costing (ABC) concept and explain how ABC can differ from traditional costing approaches? Consider a healthcare organization with which you are familiar that uses an ABC model.
Under the ABC costing method, a. activity rates are calculated by dividing the budgeted activity cost by the total activity-base usage. b. departments are identified as activities c. the budgetary activity costs are assigned to products using factory overhead rates for each activity, d. All of these choices are correct.
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment Other overheard $840,000 $5,400,000 Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Units produced Setup hours Oven hours Fudge 8,000 12,000 5,000 Cookies 145,000 3,000 35,000 How much Total Overhead is assigned to the Product Line - Fudge? Do...
Explain the conditions under which ABC (Activity Based Costing) is likely to operate
X Company uses an activity-based costing overhead allocation system. It has identified three activities and three cost drivers. The activities and budgeted costs are as follows Activity Budgeted Cost Setup $106,000 Purchasing Machine Maintenance $55,000 $58,000 The following cost driver information is available for the company's only two products, A a nd B Cost Driver Product A Product B 31,600 74,400 setup hours purchase orders 53,200 37,400 machine hours 70,500 52,900 How much overhead was allocated to Product A? (round...
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment $1,026,000 Other overheard $4,104,000 Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Fudge Cookies Units produced 8,000 445,000 Setup hours 15,200 3,800 Oven hours 3,800 26,600 Required: Round your answers to the nearest whole dollar, unless otherwise directed. 1....
Activity-Based Costing Define activity-based costing (ABC) systems. What benefits does implementing an ABC system bring to the company? Explain at least two benefits. What are the disadvantages to implementing an ABC system? List and explain at least two. Would the proposed changes make ABC a universally applicable costing method in your opinion? Why or why not? Elaborate your response. Non-Financial Performance Many city and county governments are discovering that you can control only what you measure. As a result, many...
Explain and evaluate the conditions under which ABC (Activity Based Costing) is likely to operate
identify and explain the conditions under which ABC (Activity Based Costing) is likely to operate