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:

Q 3 Kadhim Co. manufactures product B which is a part of its main product. Kadhim Co makes 50,000 units of product B per year. The production costs are detailed below. An outside supplier has offered to supply 50,000 units of product B per year at $ 2.45 each. Fixed production cost of $ 40,000 associated with the product B are unavoidable. Should Kadhim Co make or buy the product B? The production cost per unit for manufacturing a unit of product B are: Direct Materials 0.85 Direct Labor 0.65 Variable Manufacturing Overhead 0.40 (Week 9: Chapter 4, Relevant information for decision making)

The production cost per unit for manufacturing a unit of product B are:

Direct Materials	0.85
Direct Labor	0.65
Variable Manufacturing Overhead	0.40

   (Week 9: Chapter 4, Relevant information for decision making)

Answer 1

Activity Based costing is used by all major companies which manufacture multi products for example: The Coca Cola Company

Process used in ABC method to assign costs to the products

· The activities consumed for each product or service line are determined

· All the activities are pooled in a group called activity cost pool

· Cost are assigned to each activities consumed in manufacture

· Activity rate is computed for each cost pool dividing the cost pool by total activities consumed for each cost pool

· Cost is allocated based on activities consumed by product or service line

· The total cost is allocated to product is divided by total output to arrive at overhead cost per unit

Q 2 Qualitative factors also play an important role in decision making with quantitative factors. Following are some of the questions which manager can ask to identify relevant qualitative factors

· Is there any impact on employee’s morale and motivation?

· Is there any impact on the brand image of the products?

· Is there any impact on reputation of the firm?

· What is the customer perception and preferences?

· Is there any tax and regulatory requirements?

· How is the supplier reliability and support availability?

· Is there any impact on quality of product?