Your merchant fee is 3%. Your

Companies operating in a highly automated environment that produce many different products with varying levels of production sho

PSYCHO15rus [73]

Answer:

Activity based costing says that we must not absorb the Overhead cost on the basis of one absorption basis as this overhead is not generated as a result of this absorption basis(Machine hrs or labor hours). This use of one absorption basis is inappropriate (not fair allocation). We must find a fair basis that drives this cost. Upon investigation the management found that the total overhead cost suppose which is $1,050,000 can be divided into three cost pools (parts) and each part has a cost driver(a basis of allocation) which can be used to allocate this cost.The costs in the ABC system are allocated to unit product on more fair basis than the tradition absorption costing which only assume one fair basis for allocation of overhead costs. ABC criticizes traditional costing technique for using only one basis for absorption of Overheads.

Now following example will help you in understanding the difference between Absorptiion Costing and Activity based costing.

Suppose both Mr. A and Mr. B drank 5 glasses of juices. Each glass of juice costs $4. According to the Traditional absorption costing technique each individual must pay:

(5 Juices/2)*$4=$10

But ABC says its unfair, use a more appropriate basis for cost allocation. So upon investigating we came to know that Mr. A drank 3 glasses of juice and Mr. B drank 2 glasses of juice. So Mr. A must pay $12(3*$4) and Mr. B must pay $8(2*$4). This is more appropriate or fair basis of absorbing the overhead cost to each individual and is Activity Based Costing.

6 0

3 years ago

An electronics firm is currently manufacturing an item that has a variable cost of $0.50 per unit and a selling price of $1.00 p

Ne4ueva [31]

Answer:

Part (a) Should the firm buy the new equipment

The Firm Should not Buy the New Equipment since there is No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.

Part (b) should the company buy the new equipment and increase the selling price?

The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.

Explanation:

Part (a) Should the firm buy the new equipment

Do Not Buy Buy New Equipment

$ $

Sales 30,000 50,000

Less Variable Cost 15,000 30,000

Contribution 15,000 20,000

Less Fixed Costs 14,000 20,000

Net Income 1,000 0

The Firm Should not Buy the New Equipment since there is No Profit ( instead $1000 Profit lost) from this decision and is in a worse off position than before.

Part (b) should the company buy the new equipment and increase the selling price?

Do Not Buy Buy New Equipment

$ $

Sales 30,000 49,500

Less Variable Cost 15,000 27,000

Contribution 15,000 22,500

Less Fixed Costs 14,000 20,000

Net Income 1,000 2,500

The Firm Should Buy the New Equipment since an incremental Profit of $ 1500 is expected from this decision.

5 0

3 years ago

How do working conditions and company's image motivate employees?

Reil [10]

Answer:the working conditions of the place show that it will be easier to work in and that if the company has a good image of themself then you would probably earn more money.

Explanation:

I tried the best I could.

8 0

3 years ago

A change in depreciation method is accounted for:Select one:a. Retrospectively.b. Prospectively, like changes in accounting esti

arlik [135]

Answer: :a. Retrospectively

Explanation:

A change in depreciation method is a change in accounting policy and as such it would need to be accounted for retrospectively.

This means that it must be accounted for by going back to all periods where the change affects an entry and adjusting that entry for the change so that the accounting can be more accurate.

5 0

3 years ago

Fiona and her fellow Green Committee members are studying the effects of the use of energy-efficient light bulbs. Which of these

Kamila [148]

The correct answer is B.) Hope this helps!

3 0

3 years ago