Question

In: Accounting

The process of using activity-based costing information to manage a business’s activities, and thus its costs,...

The process of using activity-based costing information to manage a business’s activities, and thus its costs, is called activity-based management. How do managers use the information provided by an activity-based costing system?

Solutions

Expert Solution

Activity based costing method allocates the over expenditure to individual product as per the utilisation of the resources. Managers uses this information in a business in the following ways.

1) They get to know the accurate cost which is related to the product accurately because it is based on actual consumption of the resources. hence the overhead cost allocated to the product is its actual overhead cost for producing the product.

2) At time of launching a new product in the market it helps them to take a better decision regarding the selling price to be set for the product.

3) It determines any excess capacity or any possibility of cost reduction based on the resources available and the actual resources consumed by the products.

4) It provide them the responsible cost centres, on the basis of which the overhead cost are distributed among the product, and the performances as well as the cost behaviour as so as to understand no unwanted expenses are incurred.

5) Overall it gives a better understanding to the management to understand the total cost which is incurred and its allotment to different products and whether the resources have been fully utilised by the products or not.

If you find the answer helpful please upvote.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $101,200 Number of moves 4,000 Engineering 142,400 Number of change orders 8,000 Other overhead 358,800 Direct labor hours 52,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $54,250 Number of moves 2,500 Engineering 120,700 Number of change orders 8,500 Other overhead 148,500 Direct labor hours 45,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing...
Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $108,000 Number of moves 4,500 Engineering 165,000 Number of change orders 10,000 Other overhead 263,200 Direct labor hours 47,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job...
29) Troglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities....
29) Troglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities. The activity base, budgeted activity cost, and estimated activity-base usage for each activity are identified as follows: Activity Activity Base Budgeted Activity Cost Activity-Base Usage Facilities Square feet $800,000 80,000 square feet Instruction Number of course sections 1,200,000 600 sections Student services Number of students 290,000 2,500 students The activity-base usage associated with the Archaeology and Geology departments is as follows: Department Facilities Instruction...
Using Activity based costing, why are indirect costs allocated while direct costs are not allocated?
Using Activity based costing, why are indirect costs allocated while direct costs are not allocated?
Wellington Chocolate Company uses activity-based costing. The controller identified two activities and budgeted overhead costs based...
Wellington Chocolate Company uses activity-based costing. The controller identified two activities and budgeted overhead costs based on these activities: Setting up equipment $280,000 Baking $5,800,000 Setting up equipment is based on setup hours, and baking is based on oven hours. Wellington produces two products, fudge, and cookies. Information on each product is as follows fudge cookies Units produced 8,000 445,000 Setup hours 4,000 1,000 Oven hours 5,000 35,000 Required (round your answers to the nearest whole dollar, unless otherwise directed):...
walk through on how costs are treated under activity based costing, using an activity cost pool....
walk through on how costs are treated under activity based costing, using an activity cost pool. please show an example
Activity Cost Pools, Activity Rates, and Product Costs using Activity-Based Costing Caldwell Home Appliances Inc. is...
Activity Cost Pools, Activity Rates, and Product Costs using Activity-Based Costing Caldwell Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base information are provided as follows: Activity Activity Pool Cost Activity Base Procurement $12,600 Number of purchase orders Scheduling 90,000 Number of production orders Materials handling 11,000 Number of moves...
Part 3: Activity-Based Costing Banquet Services uses activity-based costing to compute the costs of their catered...
Part 3: Activity-Based Costing Banquet Services uses activity-based costing to compute the costs of their catered parties. Each party is limited to 40 guests and requires five people to serve and clean up. Two types of parties, an afternoon picnic and an evening formal dinner, are offered. The breakdown of the costs follows: Activities (and cost drivers) Afternoon Picnic Formal Dinner Advertising (parties) $175 per party $100 per party Planning (parties) $50 per party $75 per party Renting equipment $75...
Q1. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns...
Q1. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. Do you think Activity-Based Costing (ABC) has any advantages if so discuss few advantages and also the challenges of this system and how we can resolve it?        
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT