Select-a-costing-method

Question description

Please answer each question, min 75 words each.

1. Select a costing method: process, job, or activity based. Describe the nature of your chosen method. What types of organizations should choose that method? How is this method different from the costing methods you did not choose? Use your selected costing method to create a real-life business management scenario that includes realistic numbers. What management decisions may one make based on your scenario?

2. Suppose you are the manager of a widget-production company. The company’s two support departments, Purchasing and Human Resources, are currently allocated amongst its three manufacturing departments: Laminating, Fabricating, and Assembling. Currently, the support department’s costs are divided equally among the three manufacturing departments. The company has conducted an analysis using the number of employees in the manufacturing departments as the activity driver. The results of the analysis indicate Fabricating would receive 50% of the total costs of Purchasing and Human Resources, Laminating would receive 30%, and Assembling would receive 20%. As a manager, would you suggest the firm adopt the new activity-driven allocations or retain the current allocation method? Choose a method of allocation and provide your rationale. Identify at least two additional cost drivers that could be used to allocate the costs of the two support departments and explain the rationale you used to select the additional cost drivers.

3. What are the main differences between job, process, and activity-based costing?

4. How is manufacturing overhead calculated in each of the costing methods?

5. How are variances identified?

6. How might each of the costing methods be used in managerial decision-making?

7. Why is it important that a manager understands how product cost is determined?

8. What are the alternative costing methods? Describe the scenario in which each costing method can best be used.

Reference:

Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2016). Accounting: Tools for Business Decision Making (6th ed.). Hoboken, NJ: John Wiley & Sons.