1, Is Jazon using a traditional or an activity-based cost management system? Explain.
Traditional versus Activity-Based Cost Management Systems
Objective 5 - Explain the differences between traditional and contemporary
cost management systems.
Jazon Manufacturing produces two different models of cameras. One model
has an automatic focus, whereas the other requires the user to determine the
focus. The two products are produced in batches. Each time a batch is
produced, the equipment must be configured (set up) for the specifications of
the camera model being produced, The manual-focus camera requires more
parts than the automatic-focus model. The manual-focus model is also more
labor intensive, requiring much more assembly time but less machine time.
Although the manual model is more labor intensive, the machine configuration
required for this product is more complex, causing the manual model to
consume more of the setup activity resources than the automatic camera.
Many, but not all, of the parts for the two cameras are purchased from external
suppliers. Because it has more parts, the manual model makes more
demands on the purchasing and receiving activities than does the automatic
camera. Jazon currently assigns only
products. Overhead costs are collected in one plantwide pool and are
assigned to the two products in proportion to the direct labor hours used by
each product. All other costs are viewed as period costs.
Jazon budgets costs for all departments within the plant--both support
departments like maintenance and purchasing and production departments
like machining and assembly. Departmental managers are evaluated and
rewarded on their ability to control costs. Individual managenal performance is
assessed by comparing actual costs with budgeted costs.
Required:
1, Is Jazon using a traditional or an activity-based cost management system?
Explain.
2. Assume that you want to design a more accurate cost accounting system.
What changes would you need to make? Be specific. Explain why the
changes you make will improve the accuracy of cost assignments.
3. What changes would need to be made to implement an activity-based
operational
improved control.
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