Question

Q1 Give example of company using ABC costing and explain the process used in this company to assign costs in an ABC system? (Week 7: Chapter 7, ABC costing)

Answer:

      Q 2 Give examples of questions managers could ask to help them identify relevant qualitative factors that will be used before making decision? (Week 9: Chapter 4,   Relevant information for decision making)

Answer:

Answer 1

Answer 1 The activity-based costing (ABC) system is a method of accounting to find the total cost of activities necessary to make a product. The ABC system assigns costs to each activity that goes into production, such as workers testing a product.

Activity-based costing steps
1) Identify which activities are necessary to create a product.

2) Separate each activity into its own cost pool, which is a group of individual costs associated with an activity. Determine the total overhead of each cost pool.

3) Assign activity cost drivers to each cost pool. Cost drivers are things (e.g., units, hours, parts, etc.) that control the changes in costs.

4) Divide the total overhead in each cost pool by the total cost drivers to get cost driver rate.

5) Compute how many hours, parts, units, etc. that the activity used and multiply it by the cost driver rate.

Answer 2 In cost accounting,decisions based in part on qualitative factors are relevant. Qualitative factors should always be considered before making any business decisions.The qualitative factors that has the biggest impact on business may be1) Employee morale, schedules and other internal elements.2) Relationships with and commitments to suppliers3) Effect on present and future customers;4) and long-tern future effect on profitability.In some decision-making situations, qualitative aspects are more important than immediatefinancial benefit from a decision.A manager should consider qualitative factors as part of his or her analysis of a decision.Depending on the manager and the level of investors involved, qualitative factors can bedeciding point in whether to engage in a certain activity.