QUESTION 9 Activity Based Costing (10 marks)Your employer is contemplating changing the existing...

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QUESTION 9 Activity Based Costing (10 marks) Your employer is contemplating changing the existing traditional costing systems used in the business to adopt activity based costing (ABC). See your text...

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QUESTION 9 Activity Based Costing (10 marks)
Your employer is contemplating changing the existing traditional costing systems used in the business to adopt activity based costing (ABC). See your text chapter 3.
Prepare a business report comparing the traditional costing system with ABC and evaluate arguments for and against ABC.

Use the Internet as a resourceandacademic journal articles (about 500 words excluding references).

Use the Internet for advice of business report structures.

For example,www.business.unsw.edu.au/Students-Site/Documents/Writingareport.pdf

QUESTION 5 Labour cost concepts (8 marks)

See chapter 2 of your text.

A. "If a perpetual inventory system is used for recording movements of raw materials there is no need to conduct a physical stocktake." Do you agree? Why?

B. Should overtime payments be treated as direct labour, or as overhead?Explain.

QUESTION 1 Panopticism (4 marks)
See your text chapter 1, page 4. Describe Panopticism. How may it be relevant to management accounting? Give examples (about 200 words). Use images to enhance your answer.

QUESTION 2 Control (4 marks)
List and explain three functions of management accounting. Refer to the text chapter 1. Give examples (about 150 words).

QUESTION 3 Checklists (4 Marks)
Explain how the Van Halen rock band used checklists as a control device. See chapter 1 of your text. Use Internet resources to enhance your answer (about 200 words).

Answered Same Day Apr 04, 2020

Aarti J · Accepted Answer

Management Accounting
Course Name
Student’s Name
Course Date
Activity based Costing
Overhead allocation to the product is important in a manufacturing company to have the proper pricing of the products. The organizations usually have used the traditional method of cost allocation which is a simple way of allocating the overhead costs. As per the traditional costing system the overhead is allocated on the basis of the one allocation rate like machine hours or direct labor hours. With this the cost of the product is allocated just on the basis of one allocation base irrespective of the different cost drivers used. 
Traditional costing system is the system where the cost centres are used by the company as the cost pools to which all the indirect costs are allocated to the cost objects with the help of the cost centres.
The activity cost pool can be defined as the overall cost of the activity. Apart from that the cost driver changes the costs of the activity cost pool over the time, which affects the cost as well as the performance of the activity. In this, the indirect costs are first allocated to the activity and then to the cost object because of which the cost is allocated to the product properly. The following are the stages for the activity based costing: “(1) Identifying activities, (2) Defining the cost of the activities, (3) Defining the cost drivers of the activities, (4) Defining the volume of cost drivers, (5) Defining unit cost per cost driver for each activity and (6) Calculating the unit cost per product or service” (Cooper and Kaplan 1998; Bruggeman and Everaert 2007; Krumweide 1998).
Activity based costing was introduced to trace the overhead costs directly to the products using different cost pools. In the activity based costing the overhead costs are segregated and separated into different cost pools which has different cost drivers. Different products has different activities for each of the cost pools and the overhead costs are allocated on the basis of their activities and the cost rate for product. With the implementation of the activity based costing, the cost of the products can be identified more accurately.

QUESTION 9 Activity Based Costing (10 marks) Your employer is contemplating changing the existing traditional costing systems used in the business to adopt activity based costing (ABC). See your text...

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