Why activity-based costing is better than the costing system

Reference no: EM133731330

Homework: Cost Accounting- Accounting Non Routine Operating Decisions

I. Discuss with suitable examples why activity-based costing (ABC) is better than the traditional costing system. Provide a suitable numerical example of ABC in the manufacturing sector and show all the necessary calculations required under the ABC system.

Note: Your answer must include suitable numerical examplesshowing all the calculations of the ABC system.You are required to assume values of numerical examples of your own and they should not be copied from any sources.

II. "A non-routine decision is one that is taken in response to a non-repetitive, operational scenario." Comment on this statement and explain with suitable examples the various types of non-routine operating decisions that a company makes under such a scenario. Support your answer with numerical examples along with qualitative considerations involved in making such decisions.

Note: Your answer must include suitable numerical examples for various types of non-routine operating decisions. You are required to assume values of numerical examples of your own and they should not be copied from any sources.

III. ADLG Company has two support departments, SS1 and SS2, and two operating departments, OD1 and OD2. The company has decided to use the direct method and allocate variable SS1 dept. costs based on the number of transactions and fixed SS1 dept. costs based on the number of employees. SS2 dept. variable costs will be allocated based on the number of service requests and fixed costs will be allocated based on the number of computers. The following values have been extracted for the allocation:

	Support Departments		Operating Departments
	SS1	SS2	OD1	OD2
Total Department variable costs	16,000	19,000	105,000	68,000
Total department fixed costs	19,500	34,000	120,000	55,000
Number of transactions	50	55	250	140
Number of employees	18	24	47	38
Number of service requests	37	22	26	32
Number of computers	20	25	31	37

You are required to allocate variable and fixed costs.

IV. JKL Company processes a direct material and produces three products: P1, P2, and P3. The joint costs of the three products in 2018 were SAR 120,000. The total number of units for each product and the selling price per unit is given below:

Product	Units	Selling Price per unit
P1	55,000	SAR 70
P2	34,500	SAR 58
P3	10,500	SAR 44

You are required to use the physical volume method and sales value at the split-off method to allocate the joint costs to each product.

Reference no: EM133731330

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