logo

Activity Based Costing Assignment

   

Added on  2021-02-21

7 Pages1255 Words55 Views
Activity Based Costing

Table of ContentsTASK...............................................................................................................................................3REFERENCES................................................................................................................................7

TASKActivity Based Costing:Activity-based costing (ABC) is a way of costing associated products or services withoverhead as well as indirect expenses. This costing method considers the interaction betweenprices, operating operations, including manufactured goods, assigning indirect costs to items thanconventional costing approaches. Activity-based costing is most often used in manufacturingindustry because it improves cost report accuracy, thereby achieving more actual costs andfurther classifying business's costs throughout its production processes (Schulze, Seuring andEwering, 2012). In targeted costing, inventory costing, product range productivity analysis,consumer profitability assessment, and product pricing, such costing method is used. Costingdepending on activity is often used to gain a better understanding of expenditures, helpingbusinesses to build a much more efficient pricing structure. In this assessment A2 Milk Company, wants to estimate aggregate product cost per unit.Company has two key products “ Full Cream Fresh Milk” and “Full Cream Powdered Milk”.The main formula for Activity-based costing method is aggregate cost pool is being divided bycost driver. The cost driver's rate is being used to determine the figure of overhead as well asindirect costs associated with a specific activity in task-based costing (Monroy, Nasiri andPeláez, 2014). The operation can be viewed as a cost driver under ABC model as any operationor event A cost-driver is being used to relate to an assignment base, also recognized as activitydriver. Identification of Cost drivers is important task under ABC as they directly influencebusiness' core activities. Managing personnels chooses cost drivers as ground for allocating company'smanufacturing overhead (Özkan and Karaibrahimoğlu, 2013.). Here no industry wise standardsor policies exist which stipulates or mandate specific cost driver to be selected. Companymanagement selects cost drivers based on the variables of the expenses incurred duringproduction. Here in this regard A2 Milk Company has following cost-drivers:Activity Cost PoolCost Driver1.Milking cow (with milking machine)Machine hours2.Delivering milk through tankersNumber of units produced

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Activity Based Costing Of xyz Organisation - Financial Management & Decision Making
|19
|1605
|404

Management accounting.
|14
|3733
|1

Finance and Accounting Assignment Solution
|9
|1747
|31

Activity Based Costing: An Emerging Cost Model for Financial Management & Decision Making
|14
|2530
|389

Activity Based Costing in Financial Management
|27
|1377
|91

Combat Fire, Inc. manufactures steel cylinders
|24
|6292
|59