Question

A: 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:

      B: 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:

please provide answer in writing not with a photo

Answer 1

Ans A

the activity-based costing process shows you which overhead costs you might be able to cut back on. For example, you make soap. Soap A requires more overhead, like testing, than Soap B. Using activity-based costing, you assign the right overhead costs to the appropriate products.

To use activity-based costing, you must understand the process for assigning costs to activities.

First, identify which activities are necessary to create a product.

Then, 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. For example, purchasing could be its own cost pool.

Next, assign activity cost drivers to each cost pool. Cost drivers are things (e.g., units, hours, parts, etc.) that control the changes in costs. For example, purchasing costs are driven by the number of parts purchased.

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

Lastly, compute how many hours, parts, units, etc. that the activity used and multiply it by the cost driver rate.

ABC systems can be complicated. Check out this example to help further illustrate the process.