Problem 2.30 Systems Concepts, Traditional versus Activity-Based Cost AccountingSystemsThe following items are associated with a traditional cost accounting information system, anactivity-based cost accounting information system, or both (that is, some elements are commonto the two systems):a. Usage of direct materialsb. Direct materials cost assigned to products using direct tracingc. Direct labor cost incurrenced. Direct labor cost assigned to products using direct tracinge. Setup cost incurrencef. Setup cost assigned using number of setups as the activity driverg. Setup cost assigned using direct labor hours as the activity driverh. Cost accounting personneli. Submission of a bid, using product cost plus 25 percentj. Purchasing cost incurrencek. Purchasing cost assigned to products using direct labor hours as the activity driverl. Purchasing cost assigned to products using number of orders as the activity driverm. Materials handling cost incurrencen. Materials handling cost assigned using the number of moves as the activity drivero. Materials handling cost assigned using direct labor hours as the activity driverp. Computerq. Costing out of productsr. Decision to continue making a part rather than buying its. Printert. Customer service cost incurredu. Customer service cost assigned to products using number of complaints as the activitydriverv. Report detailing individual product costsw. Commission costx. Commission cost assigned to products using units sold as the activity drivery. Plant depreciationz. Plant depreciation assigned to products using direct labor hoursRequired:1. For each cost system, classify the relevant items into one of the following categories:a. Interrelated partsb. Processesc. Objectivesd. Inputse. Outputsf. User actions2. Explain the choices that differ between the two systems. Which system will provide the bestsupport for the user actions? Explain.3. Draw an operational model that illustrates each cost accounting system—with the items thatbelong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two sys-tems. Which system should be chosen?
Problem 2.30 Systems Concepts, Traditional versus Activity-Based Cost Accounting
Systems
The following items are associated with a traditional cost
activity-based cost accounting information system, or both (that is, some elements are common
to the two systems):
a. Usage of direct materials
b. Direct materials cost assigned to products using direct tracing
c. Direct labor cost incurrence
d. Direct labor cost assigned to products using direct tracing
e. Setup cost incurrence
f. Setup cost assigned using number of setups as the activity driver
g. Setup cost assigned using direct labor hours as the activity driver
h. Cost accounting personnel
i. Submission of a bid, using product cost plus 25 percent
j. Purchasing cost incurrence
k. Purchasing cost assigned to products using direct labor hours as the activity driver
l. Purchasing cost assigned to products using number of orders as the activity driver
m. Materials handling cost incurrence
n. Materials handling cost assigned using the number of moves as the activity driver
o. Materials handling cost assigned using direct labor hours as the activity driver
p. Computer
q. Costing out of products
r. Decision to continue making a part rather than buying it
s. Printer
t. Customer service cost incurred
u. Customer service cost assigned to products using number of complaints as the activity
driver
v. Report detailing individual product costs
w. Commission cost
x. Commission cost assigned to products using units sold as the activity driver
y. Plant
z. Plant depreciation assigned to products using direct labor hours
Required:
1. For each cost system, classify the relevant items into one of the following categories:
a. Interrelated parts
b. Processes
c. Objectives
d. Inputs
e. Outputs
f. User actions
2. Explain the choices that differ between the two systems. Which system will provide the best
support for the user actions? Explain.
3. Draw an operational model that illustrates each cost accounting system—with the items that
belong to the system used as examples for each component of the model.
4. Based on the operational models, comment on the relative costs and benefits of the two sys-
tems. Which system should be chosen?
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