Dada Boat Enterprise wishes to introduce ABC, and has identified two major cost pools for production overheads and their associated cost drivers. Information on these cost drivers is given below: Activity Cost Pool Cost driver Cost associated with activity cost pool Receiving/Inspecting/Quality Purchase requisitions GH£2,800,000 Assurance Production Number of set-ups GH¢2,400,000 scheduling/Machine set-ups Some relevant information on the three products is given below: SmartPLS STATA E-view Number of purchase requisitions 2,400 3,600 4,000 Number of set-ups 480 520 600 You are required, from the information given, to: i. Calculate the activity -based production cost of the three products, SmartPLS, STATA and E- view. ii. Comment on the differences between the original standard costs and the activity-based costs you have calculated in question 3a(i). b) Briefly discuss the purpose of apportioning fixed overheads.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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