Bullshit

The account issue addressed in this case study was whether to continue with the existing costing method for each product line or implement a activity-based costing method. The ABC method allows for an organization to allocate direct and indirect costs to products and obtain an accurate level of costs and profit for each unit produced, thus allowing the company to improve their overall operational effectiveness. ABC does differ from the existing costing method described in the case as the old method does not account for volume related overhead costs which must be allocated to the specific ODD and TGC products.

Under the Activity-based costing system, Glaser will use preliminary stage cost drivers to link costs of resources consumed in one activity center to other activity centers. Some costs, such as batch-level activity center costs are

Absorption costing is used for all outside reports. All non-direct fixed costs are allocated using various allocation bases as indicated throughout the project. The Company does not use a full ABC costing system; however, it does employee some of the ABC concepts in the budgeting process.

| assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.

According to this method, every unit of the product is assigned all direct, fixed, and variable costs. This method includes the cost of direct materials and labor as well as a portion of the overhead costs associated with it in the final costing of every unit of the product.

There is a company in the area where I live that manufactures custom made pictures frames. The elements of the unit cost would include the raw materials (wood, glass, glue, nails, etc.) and paint sprays used for finishing the frames. The unit cost refers to the total expense incurred in order to produce one item. In order to determine the unit cost the company has to take into consideration the fixed costs, variable costs, overhead costs, direct material,

The activity based costing system enables the business for allocates related overhead and costs depending on the participated activities. it also establishes a reasonable product pricing without overpricing or underpricing the product, furthermore, its consider the divers customer groups and the product competitive cost to

Gangwere Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

Activity Based Costing is a method whereby costs are assigned to products or services based on the resource that they consume, it is an alternative of traditional accounting where business overheads, indirect costs such as lighting, heating, and market are allocated in proportion to an activity direct cost.

The typical business uses a two-step system for absorption costing in which costs are accumulated in a pool and then allocated to specific products based on a single, plant-wide base, such as direct labor hours utilized in producing the product [2]. Other allocation bases are machine hours or direct labor cost, for example. The wide use of direct labor hours as an allocation basis is historical. When cost accounting systems were being developed in the mid-1920s, labor was a major cost and thus a target of management attention.

I recommend that we use absorption costing over variable costing. Absorption costing is a method where “…fixed manufacturing costs are inventoriable costs” (Datar, et al, 2009). That is, inventory “absorbs” all manufacturing costs. In the absorption metho there does not need to be a distinction between fixe and variable costs.

The absorption costing system is a method of determining a product cost by applying all overhead costs along with all direct material and direct labor to each product produced. The overhead costs are applied equally among all products produced and the costs associated with producing a product are not recognized as expenses when the organization pays the bill but rather when the product is sold. The expenses are kept in work-in-process inventory until the product is completed at which time the expenses are moved to the finished-goods inventory. It is not until the product is sold that the costs are represented on the income statement. Fisher and Krumwiede (2012) note that

In determining the fixed costs per unit for the period for absorption costing (not needed for variable costing since the entire fixed cost is expensed as a cost of the month, not a cost of units), you spread the fixed costs across all the units made. Since production was increased substantially, the fixed cost per unit was reduced:

Question 1: Compare activity based costing (ABC) with traditional costing. Is it an improvement? If so why? Explain with a case (numerical).

The procedure of costing is broadly the same as process costing except that in this case, cost unit is an