Costing Method

This document discusses various costing techniques and methods used in business, such as standard costing and activity-based costing. It provides solutions to questions related to costing and offers insights into the advantages of using standard costing systems. The document also explores the differences between absorption costing and variable costing. Subject: Costing Method, Document Type: Assignment, Type of Assignment: Costing Techniques

Running Head: COSTING METHOD 1
COSTING TECHNIQUES

Running Head: COSTING METHOD
Table of Contents
Question 1........................................................................................................................................3
Part 3............................................................................................................................................3
Part 4............................................................................................................................................3
Question 2........................................................................................................................................3
Part 2............................................................................................................................................3
Part 4............................................................................................................................................3
Question 3........................................................................................................................................4
PART 5........................................................................................................................................4
Question 4........................................................................................................................................5
Part 1............................................................................................................................................5
Question 5........................................................................................................................................5
Part 2............................................................................................................................................5
Part 4............................................................................................................................................5
References........................................................................................................................................6

Running Head: COSTING METHOD
Question 1
Part 3
The part 3 of the question suggests that the Resort Islands needs to hire the new full time
staff for accommodating the enormous number of students. The five major decisions that can be
a suitable option for the Resort Islands are listed below.
 The academic staff can be called on the rotational basis that is alternatively, which will
spare the cost of the company and the time can be easily adjusted to settle the growing
number of the students.
 The graduate teachers can be appointed so that it’s a win-win situation for both the Resort
Islands as well as the teachers.
 The overall size of the class shall be reduced and the each section separated that of the
class are also required a combined class so that the same amount can be adjusted in the
new section.
 The time shall also be increased as the teachers can teach for example 50 students instead
of the 40 students (Jordan & Lloyd, 2017).
 The subject experts can take the common class instead of taking the individual classes.
Part 4
The deputy vice chancellor of the Resort Island is wrong in assessing the staff as the real
driver, whereas the real key movers are the students. This can be concluded on the basis that the
students pay amount in the form of the fees, which is used by the management to have their
operations on going. Hence the DVC was not at all aware of the linkages with the budgeting.
Question 2
Part 2
The clerical hours are the basis rather than the number of the application as the hours will
decide how much hours were required to process those applications. The flexible budget is also
based on the differentiated needs and the clerical hours will determine the overhead costs, the
clerical hour is the real basis for the purpose of the calculation (Maher, Fakhar & Karimi, 2018).

Running Head: COSTING METHOD
Part 4
MEMORANDUM
TO: GOOD HEALTH MANAGEMENT
FROM: Chief Accountant
DATE: 15th May 2019
PURPOSE: The adoption of the standard costing system and its advantages.
This memorandum showcases the viability of the standard costing system and the major reasons
behind why such system shall be inculcated by the management of the Good Health Insurance
Company.
Standard costing is one of the techniques of the costing which are used to evaluate the right cost.
It is a pre-determined quantity set in the definite situations against the actual performance.
 The benefits of the standard costing are, the companies can gain the control over their
costs by typically setting the each standard and then highlighting the variances if
occurred any. In this way the Good health management will be able to curtail the extra
expenses easily (Ascione, et al 2015).
 This tool of standard costing is more useful for the purpose of taking quick decisions and
grabbing the information for the managerial processes. The management can use the
actual costs in preparing the budgets and it can be the most valuable resource for the
corporate level of management.
 This tool also made the measurement of the inventory to an easy level. The standard cost
system provides unit costs for batches of similar products which are of different nature.
For example, this variation can be caused due to the disruption of technology, during the
production of a particular or specific batch that increases the labor and overhead charged
to that batch (Managerial Accounting, 2017).

Running Head: COSTING METHOD
Question 3
PART 5
There is a variance in the methodology of the two product costing systems and wide
difference in the accounting of the costs as the two methods follow different approach from each
other. The conventional method on one hand follows the concept where the total costs are
allocated as the manufacturing overhead and they are subtracted from the revenue, whereas in
case of the activity based costing the costs are assigned on the basis of the activity pools
associated with them. For example, in this case the machine set ups are associates with the
machine hours, the material handling is aligned with the weight of the raw material and so on.
While considering both the costing techniques the one that are suitable is the activity
based costing method and the same shall be recommended to the Pix Photographic Supply
Limited. This is due to the fact that it gives the clear presentation of how each cost is allocated
on what basis it is allocated. The activity based costing determines the accurate product costing
by focusing on the cause and effect relationship. This will help the management of the Pix
Photographic Supply Limited to get the accurate results. Moreover the ABC figures out the
nature of the costs conduct and helps in reducing the expenses and taking necessary and the
corrective measures in order to cater the needs of the customer. With the help of the ABC,
accountants can curtail many fixed overhead expenses supervising the exercises which have
caused these fixed overhead expenses. Hence the Pix Photographic Supply Limited must opt the
ABC costing method.

Running Head: COSTING METHOD
Question 4
Part 1
LETTER
TO: Managing Director
FROM: Consultancy Firm
SUBJECT: Dilemma of whether selling the product at the split off or continuing the process.
This letter is presented to the Managing Director of the Cool Pool Limited, in order to
give the answer to the question, whether the product shall be continued or sold at the split off
point. Split off point is basically a stage where the jointly manufactured products are henceforth
separated and sold individually. The costs can be identified individually. In case of the Cool Pool
Limited the banolide shall be sold off at the split off stage as it would save the loss incurred of
$11200, in case the product is continued with the process. This would save the additional costs to
the company.
Further the key issues that the management must keep in their mind while proceeding for
the outsourcing of the decision are the efficiency of the cost, core activities and the skill required
to implement those activities, the reputation of the business, the innovative methods and the
technology, the pricing strategy and lastly the brand and the support or collaboration. Hence, it is
advised to the management of the cool pool limited that all these factors play a vital role in
determining whether the outsourcing would help business grow or not (The law Dictionary,
2016).
Yours Sincerely,
Chief Accountant

Running Head: COSTING METHOD
Question 5
Part 2
Amongst the two methods by which the profit and loss is calculated in case of the
Slumberworld Private Limited, the one showing the higher level of the profits, the variable
costing method depicts the higher profit in comparison to the absorption costing. The major
reason behind the variance in the profit is because the variable costing are not including the
fixed costs in the calculation of the cost per unit, whereas the absorption costing is using it.
Part 4
Absorption costing is that type of the costing that entails the full cost while calculating
the manufacturing costs. It includes the direct materials, direct labor, variable as well as the fixed
overheads, unlike in the variable costing. The profits are booked higher in the variable costing
and hence, the true position is not determined. In order to get the lucid results the Slumberworld
Private Limited is advised to opt for the absorption costing as this will give the accurate results
to the management without hiding any amount of the fixed costs. This method is also required
for the purpose of the external financing reporting and income tax reporting (Christian, 2018).

Running Head: COSTING METHOD
References
Ascione, F., Bianco, N., De Stasio, C., Mauro, G. M., & Vanoli, G. P. (2015). A new
methodology for cost-optimal analysis by means of the multi-objective optimization of
building energy performance. Energy and Buildings, 88, 78-90.
Christian, D. (2018). Building Cost Management: Case Study Using Costing Methods. IJAME.
Jordan, P., & Lloyd, C. (2017). Staff management in library and information work. Routledge.
Maher, M. H., Fakhar, M. S., & Karimi, Z. (2018). The relationship between budget emphasis,
budget planning models and performance. Journal of Health Management and
Informatics, 5(1), 16-20.
Managerial Accounting, (2017). Advantages and Disadvantages of Standard Costing. Retrieved
from https://courses.lumenlearning.com/sac-managacct/chapter/advantages-and-
disadvantages-of-standard-costing/
The law Dictionary, (2016). What is SPLIT OFF POINT?. Retrieved from
https://thelawdictionary.org/split-off-point/