Question

Name: ________________________________________

How does Activity Based Costing differ from the traditional overhead allocation system?

__________________________________________________________________________________________________________________________________________________________________________

Quality Management:

Type of Quality Cost	Voluntary or Failure?	Type?
Downtime
Reliability testing
Warranty
Product design
Training costs
Scrap
Customer relations
Inventory inspection
Downtime
Re-inspection
Repair and rework

Identify 3 products that would use Job order costing:

(1)_____________________________________________

(2) _____________________________________________

(3)_____________________________________________

Identify 3 products that would use process costing:

1)_____________________________________________

(2) _____________________________________________

(3)_____________________________________________

Answer 1

How does Activity Based Costing differ from the traditional overhead allocation system?

Regarding Overhead cost allocation and mainly large Manuafcaturing organization , Activity Based Costing (ABC) is more accurate and perfect measure to derived Overhead cost rather than Traditional overhead cost allocation .

Definitely Acitivity Based costing system is expensive but this ABC system will provide accurate number , Profitability about the Company. It gives more accurate cost of each product With hep of this costing system , it is easy to identify which process and cost , overhead cost creating issue in generating Profitability .

More accutate information , cost allocation , details profitability , perfect way of overhead allocation – ABC system is the best . The method expand expand the number of indirect cost pool that can be allocated to specific products . Under traditional method , consider ONLY one pool of a company total overhead cost to allocate

Ans relates to Job order

Job order costing followed by – Printing Company, Aircraft and Construction . Under this costing method three basic head would be – Direct material , direct labour , and Factory Overhead

Identify 3 products that would use process costing:

Sprots drink Manufacturer - Coca Cola company is using Process costing

Shampoo Manufacturer - Unilever used process base costing

Bag mabufacture

Reliability testing – Voluntary cost- This test conduct to verify whether product meet Reliable product quality or Not

Warranty – Failure cost – This cost incurred or mainly relates after product shipped and delivered to the customer

Product design – Voluntary cost – Thie cost mainly relates to Research and Development phase cost

Training cost – Volutary cost - Training is essential to prevent any failure

Scrap – Internal Failure cost

Customer relation – Failure cost – This are mainly relates to after the product is delivered and its come under “ Failure cost “

Inventory Inspection – Voluntary cost – This is basically treated as “ prevention cost . Inventory inspection is most import cost measurement

Downtime – fall under Failure cost – This cost incurred before final delivery of the product

Repair and work – falling under “ Failure cost” Repair , reqork are internal cost and done before final delivery of goods

Re Inspection cost – Voluntary cost-