Chapter 2, Problem 30P

The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems):

1. a. Usage of direct materials
2. b. Direct materials cost assigned to products using direct tracing
3. c. Direct labor cost incurrence
4. d. Direct labor cost assigned to products using direct tracing
5. e. Setup cost incurrence
6. f. Setup cost assigned using number of setups as the activity driver
7. g. Setup cost assigned using direct labor hours as the activity driver
8. h. Cost accounting personnel
9. i. Submission of a bid, using product cost plus 25 percent
10. j. Purchasing cost incurrence
11. k. Purchasing cost assigned to products using direct labor hours as the activity driver
12. l. Purchasing cost assigned to products using number of orders as the activity driver
13. m. Materials handling cost incurrence
14. n. Materials handling cost assigned using the number of moves as the activity driver
15. o. Materials handling cost assigned using direct labor hours as the activity driver
16. p. Computer
17. q. Costing out of products
18. r. Decision to continue making a part rather than buying it
19. s. Printer
20. t. Customer service cost incurred
21. u. Customer service cost assigned to products using number of complaints as the activity driver
22. v. Report detailing individual product costs
23. w. Commission cost
24. x. Commission cost assigned to products using units sold as the activity driver
25. y. Plant depreciation
26. z. Plant depreciation assigned to products using direct labor hours

Required:

1. 1. For each cost system, classify the relevant items into one of the following categories:
   1. a. Interrelated parts
   2. b. Processes
   3. c. Objectives
   4. d. Inputs
   5. e. Outputs
   6. f. User actions
2. 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain.
3. 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. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?