Management Accounting Essay

2170 Words Jan 7th, 2013 9 Pages
Management Accounting

Contents

1. Introduction 3

2. Traditional costing system and its limitations 3

3. Activity-Based Costing 4

4. Case Question 4

5. Analysis of the different result between traditional costing system and ABC system 5

6. Limitations of ABC system 6

7. Conclusions and Recommendations 6 8. References 7
…show more content…
In order to improve the accuracy, while ABC system requires identification of value-added activities. The advantages of providing accurate cost information will require additional effort and expense to obtain the information needed for the analysis. (Lewis, 1995) This also the biggest problem when managers consider whether to change to the ABC costing system. However, a appropriate design tool can help to reduce the time used on collection information and overcome the difficulties when company design the cost model.

4. Case Questions
Question A: Based on Emmet’s assumption, calculate the ABC cost per unit and profit per unit of each test. Activity | Cost rate | T1 | T2 | T3 | T4 | T5 | 1. Setup labor | 264.35 | 92522.66 | 137462.2 | 190332.3 | 211480.4 | 243202.4 | 2. Equipment | 4.30 | 22570.24 | 223552.9 | 340488.3 | 378320.3 | 435068.3 | 3. Rent | 1.3 | 4550 | 67600 | 93600 | 104000 | 119600 | 4. Billing | 0.77 | 2700.83 | 40126.67 | 55560 | 61733.33 | 70993.33 | 5. Clerical | 0.53 | 1866.67 | 27733.33 | 38400 | 42666.67 | 49066.67 | 6. Other | 0.67 | 2333.33 | 34666.67 | 48000 | 53333.33 | 61333.33 | Total | | 126543.74 | 531141.8 | 766380.6 | 851534 | 979264.1 | | | | | | | | | | | | | | | | | | | | | |

The above table shows the cost rate of each activity and the expenses of these value-added activities are allocated to each product according to their consumption of these

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