Dhaka Power Corporation is one of Walton’s equipment suppliers. Dhaka Power currently uses traditional costing for making business decisions. Upon request from Walton, the company has decided to move to activity-based costing for equipment production related to products WAL101 and WAL201. As one of the company’s management accountants, you have been asked to prepare an analysis comparing the two costing methods for the next company board meeting. Your CFO has given you the following quarterly data from the Dhaka Power Corporation’s costing system: Answer the following questions: a) What is the total manufacturing cost per unit using traditional costing for WAL101 and WAL201? Use machine hours as the cost-allocation base. b) What is the total manufacturing cost per unit using activity-based costing for WAL101 and WAL201? c) What conclusions can be drawn from your result
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.
Dhaka Power Corporation is one of Walton’s equipment suppliers. Dhaka Power currently uses traditional costing for making business decisions. Upon request from Walton, the company has decided to move to activity-based costing for equipment production related to products WAL101 and WAL201. As one of the company’s
Answer the following questions:
a) What is the total
b) What is the total manufacturing cost per unit using activity-based costing for WAL101 and WAL201?
c) What conclusions can be drawn from your results?
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