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.
Departmentalization refers to subdividing a business or organization into sections based on their function or other criteria. There are different types of departmentalization. Some types include functional, product, customer, geographic, process and divisional. Based on the scenario given above, Larimer is using functional departmentalization.
Answer:
Marketing company era
Explanation:
They need to get their product out there, so they use mission statements to please the customer, which is marketing.
Hey there!!
The correct answer is Option A. an Increase in supply
Hope this helped and I wish you the best in luck! (:
Answer: $6.2
Explanation: Contribution margin is the amount of revenue left after paying for the variable cost, it can be formulated as follows :-
contribution = sales - variable cost
In case of Limeade:-
sale price = $22.10
Variable cost = $15.90
so, putting the values into equation we get :-
contribution per foot = $22.10 - $15.9 = $6.2
