Question

CORE Fitness Inc. is a high-end athletic gear manufacturer. The production of gear involves many complex and specialized activities that, before now, have lacked organization or procedural direction. The production manager has considered applying a systematic costing system to improve on efficiency of production, and he wants your advice about activity-based costing (ABC). However, while the production manager wants your advice, he has argued that interrupting the existing costing system would be a detriment to the factory. In contrast, the entry-level accountant believes an ABC system would in fact assist the company more effectively in identifying the basis of costs and how to actually regulate the costs.

Role play as either the production manager or the entry-level accountant to convince the other person to agree with your stance.

Answer 1

CORE Fitness Inc.  should follow the activity based costing system as soon as possible because the company have defferent stage of production.

Activity based Costing

Activity based costing is the costing methord method that simply means assigning the cost to the defferent overheads and indirect costs to product and services.Activity based cost system recoganise or help to determine the relationship between costs, overhead activities and manufactured products.

advantages of ABC system

1. Accurate the exact cot of the product

2.provide Information about Cost Behaviour of the produt

3.ABC fesilitate Tracing of Overhead Costs

4.Cost managment by using cost drivers

So,Activity Based Cost system provide accurate information about the cost of production.adaption of Activity Based cost system is not vary complicated and CORE Fitness Inc is a manufacturing firm and the production process is comlex and specialized.so the ABC system is compalsory especially  ABC provide the currect and accurate information.