Answered

Choose ONE of the costing systems studied from the list below, and answer the questions that follow:

1. Job Costing
2. Process Costing
3. Operation Costing (Hybrid Costing)
4. Activity-based Costing (ABC)

Questions:

a. Briefly discuss the features of your chosen costing system.
b. Identify 2 specific Australian companies that your chosen costing system is suitable for, and explain why.
c. Discuss two potential uses of the cost information for decision-making, to the managers in each of the 2 organisations selected in part b.

Answer :

Answer:

Activity based costing method has gained significance in the business world.

Explanation:

a. Activity based costing is a method in which cost driver is identified for each cost that occurs during the manufacturing process. The overhead rate is calculated based on cost drivers. This method has gained significance in business due to the ease of its application and costs are assigned to their respective cost drivers.

b. The activity based costing is used by various organizations in Australia. Booth and Giacobbe, Clarke and Mia and many other companies have successfully implemented ABC costing system in their businesses. The increased and diverse products costs are easily calculated by applying activity based costing method.

c. The companies can use the activity cost method to calculate the overhead rate that will be applied to the product. These overheads will be included in the cost of the product and then cost per unit for each unit produced is identified. This helps managers to select suitable selling price and cost cutting managements.

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