Question

In an activity-based costing system for an ice cream store like Cold Stone Creamery,

1. What types of costs are incurred to get the final product to the customer?

Answer 1

Ans:

Activity based costing calculates the overheads by taking into account all the activities that are involved in making of a product. It is an accurate method of product or service costing leading to more accurate pricing decisions. In the given case, costs of all the activities needed in order to make the ice cream should be consolidated to get the final product cost.

The following types of costs are incurred to get the final product to the customer:

1. Material cost
2. Labour cost
3. Set-up cost
4. Inspection cost
5. Machine expenses
6. Finished goods handle/ dispatch cost
7. Supervision cost
8. Packing cost