Abc P2
Abc P2
Abc P2
COSTING SYSTEM-P2
OCTOBER 19, 2021
ACTIVITY BASED COSTING SYSTEM
Activity-based costing (ABC) is a costing method that is designed to
provide managers with cost information for strategic and other
decisions that potentially affect capacity and therefore “fixed” costs.
ABC is ordinarily used as a supplement to, rather than as a replacement
for the company’s usual costing system.
TRADITIONAL COSTING
Assign costs to the activity centers where they are accumulated while waiting to be
applied to products. Costs that are traceable to the activity center should be
assigned directly to activity centers. Other costs shared by two or more activity
centers should be assigned according to some cost driver that controls the utilization
of the costs involved.
TRUE
TRUE OR FALSE
The following information pertains to the actual consumption of activity resources for two
representative jobs completed during October:
Job #1 Job # 2
Number of units produced 2,000 4,000
Number of purchased orders 20 30
Number of setups 40 40
Number of kilowatt hours 1,000 2,000
The plant’s present cost accounting system allocates manufacturing support costs to job using a plant-wide cost driver rate based on machine
hours. The total machine hours for the coming year are estimated to be 100,000 hours.
The company has received a request for a bid to deliver 2,000 units of the cash register model K1. The following estimates pertain to the
production of 2,000 units of K1: