Explain what advantages the new management accountant

Reference no: EM131438028

Question: Kaplan plc makes a range of suitcases of various sizes and shapes. There are ten different models of suitcase produced by the business. In order to keep inventories of finished suitcases to a minimum, each model is made in a small batch. Each batch is costed as a separate job and the cost for each suitcase deduced by dividing the batch cost by the number of suitcases in the batch. At present, the business derives the cost of each batch using a traditional job-costing approach. Recently, however, a new management accountant was appointed, who is advocating the use of activity-based costing (ABC) to deduce the cost of the batches. The management accountant claims that ABC leads to much more reliable and relevant costs and that it has other benefits.

Required:

(a) Explain how the business deduces the cost of each suitcase at present.

(b) Discuss the purposes to which the knowledge of the cost for each suitcase, deduced on a traditional basis, can be put and how valid the cost is for the purpose concerned.

(c) Explain how ABC could be applied to costing the suitcases, highlighting the differences between ABC and the traditional approach.

(d) Explain what advantages the new management accountant probably believes ABC to have over the traditional approach.

Reference no: EM131438028

Questions Cloud

Overestimated by the process engineers : If the achievable improvement in production yield has been overestimated by the process engineers, at what percent yield improvement would the project breakeven?

Increase in viewing options available to fans : Discuss, in your own words, the economic effect onthe sports industry of the increase in viewing options available to fans (sports specialty channels, internet streaming, etc.)

What would the virtuous person have done instead : How did their actions display or fail to display that virtue, and in the case of the failure, what would the virtuous person have done instead? Be sure to share the links with your classmates so they can read the full articles or watch the videos..

Are adult learning theories evident in the course design : Explain the training needs analysis approach that your organization uses to define training needs. Describe the process for capturing needs for individuals, groups, and the wider skills for the organization.

Explain what advantages the new management accountant : Kaplan plc makes a range of suitcases of various sizes and shapes. There are ten different models of suitcase produced by the business. In order to keep inventories of finished suitcases to a minimum, each model is made in a small batch.

Marginal cost of providing entertainment : What is the total the arena will make from parking fees if the marginal cost of providing entertainment is a constant MC = $10 per seat?

Do business ethics classes have value in the workplace : Although few people would turn to the Wall Street Journal as a learned expert on the teaching of ethics, the issue raised by the newspaper is a serious one: Can ethics be taught? Do business ethics classes have value in the workplace? Defend your ..

Marginal cost of providing entertainment : What is the total the arena will make from parking fees if the marginal cost of providing entertainment is a constant MC = $10 per seat?

User Account

All Pages