To: Vice President It would be in Competition Bikes‚ Inc.’s best interest to change from a traditional costing system to an activity-based costing system. In this summary you will find information as to why this change is important as it will highlight the differences between traditional based costing and activity based costing systems. This summary will also give you further findings on Competition Bikes‚ Inc. breakeven point when evaluating the sales units and the sales dollars and also the
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consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates‚ continuous production of unprofitable products‚ and ineffective processing schedules. In this case study‚ we will discuss the costing methods which Zauner Ornaments have used or is currently using and‚ in conclusion‚ be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks
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unsuccessful competitive bids due to the inherent deficiencies of their existing costing system. This has illustrated the importance of obtaining a thorough understanding of costs‚ and desirability of implementing a superior costing system. This report contains: * A general overview of the problems confronted by JDCW * An analysis of the current standard costing system * An exposition of Activity Based Costing (ABC) * An evaluation of the strengths and weaknesses of each system
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and shareholder value. Cost accounting also focuses on what drives value‚ which costs and which activities have a positive or negative effect in the creation of value for
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Running Head: Costing Methods Paper Costing Methods Paper Lavelle Haynes ACC/561 February 14‚ 2011 Professor Micheal Gaspar Super Bakery is a distinguished company created in 1990. The company has is a supplier of mineral‚ vitamin‚ and protein enriched doughnuts. The strategy applied by the company is job order cost method. Job costing is a product costing system when costs are accumulated by specific job orders and assigned to batches of products. In other words‚ manufacturing costs
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Perspective” Activity Cost Pool Annual Cost Market analysis $1‚050‚000 Product design 2‚350‚000 Product development 3‚600‚000 Prototype testing 1‚400‚000 Activities Cost Drivers Estimated Drivers Market analysis Hours of analysis 15‚000 hours Product design Number of designs 2‚500 designs Product development Number of products 90 products Prototype testing Number of tests 500 tests 1. Compute the activity-based overhead rate for each activity cost pool.
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Activity based costing Activity based costing is an accounting method that is created to provide manager with cost information and other that potentially affect capacity. Activity based costing is used to determine product costs for management report. This method is commonly use as a complete to the company costing system. There are two activity based costing system that most organization use. The two are the official costing system that used for preparing external financial reports and activity
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CHAPTER 4 ACTIVITY-BASED COST SYSTEMS TRUE/FALSE 1. Traditional cost systems use actual departments or cost centers for defining cost pools to accumulate and redistribute costs. a. True b. False 2. Activity-based cost systems use cost centers to accumulate costs. a. True b. False 3. Traditional cost systems are likely to undercost complex products with lower production volume. a. True b. False 4. The first step in designing an activity-based cost system
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report. 2 Report on the Reason of Why the Companies Should Implement ABC Rather than Traditional Cost System Executive Summary Activity-based costing provides a more accurate method of product/service costing‚ leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers; and makes costly and non-value adding activities more visible‚ allowing managers to reduce or eliminate them. ABC enables effective challenge of operating costs to find better ways
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Question 1: Compute the full production cost (per gallon) of the Polynesian Fantasy and Vanilla products using a) Will’s old costing method; b) The new costing method. 1 1a) Based on Will’s old costing method (Volume Based Costing): • California Creamery has a budgeted manufacturing overhead of $600‚000 and a budgeted direct labour cost of $300‚000 • Overhead rate per direct labour cost => $600‚000/$300‚000 = $2 From Exhibit 2 CALIFORNIA CREAMERY‚ INC. Two Product Examples (2004 Data) Polynesian
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