Accounting
a) i) Using direct labour hours as the cost driver for the overhead costs, the following table presents the net profit calculation for each line of motorcycle:
Vroom plc
Total Profit
Driver:
Direct labour
Sunshine
Roadster
Fireball
Output
DL
P
Materials
Revenue
less DL
less Materials
Gross Profit
Less Overhead
Net Profit
Activity-based costing is designed to allocate overhead costs based on the resources that each activity consumes (The Economist, 2009). The key to activity-based costing is that the cost drivers are assigned differently, and in a manner that should better reflect actual resource usage than a cost driver that may be picked almost at random (Investopedia, 2013). Using ABC, the following are the net profit calculations for the three different products at Vroom.
Vroom plc
Total Profit
Driver:
ABC
Sunshine
Roadster
Fireball
Output
DL
100000
110000
40000
250000
P
Materials
Deliveries
Set-ups
Purchase orders
Revenue
7
8
2800000
less DL
1
1100000
400000
less Materials
400000
480000
180000
less Del
800000
640000
560000
less SU
2
2666667
1
less PO
1750000
1312500
437500
Net Profit
1050000
1800833
-110833
b) Activity-based costing is designed to give a more accurate representation of the costs for each product. The above charts are the net profit calculations using the current managerial accounting and using activity-based costing. These tables will be used to illustrate the value of activity-based costing.
The current system uses direct labour hours as the means by which overhead is allocated. This is not a particularly accurate reflection of how the overhead costs are actually incurred. It is, in fact, a shorthand assumption that bears little relationship to reality. Using direct labour hours as the means of allocating overhead expense tells us that each of our products is profitable, but activity-based costing gives us...
Accounting This accounting report is intended to emphasize the importance of the role of a management accountant in business operational and financial decisions. The focus on two companies engaging in different lines of business with disparate concerns, questions, and issues provides a basis for the reader to understand specific instances in which a management accountant can play a pivotal role in the success of an enterprise. W. White Chemicals was perplexed
ABC can identify high overhead costs per unit and find ways to reduce the costs, avoid decreases in head counts due to inaccurate allocation of costs, and measure profitability with higher accuracy than traditional costing that uses direct-labor hours as the only cost driver (Activity-based costing, n.d.). Bibliography Activity-based costing (ABC). (n.d.). Retrieved Apr 2, 2009, from Managers-Net: http://www.managers-net.com/activityBC.html Activity-based costing (ABC): What is it and how can reengineering teams use it?
accounting important success firm? What methods cost accounting ? The paper (a) identify main issues chosen area, (b) reference learning occurred, (c) build class activities incidents facilitated learning understanding, (d) present specific current / future applications relevance typical workplace. Cost accounting -- definition, importance, methods The modern day society is constantly presenting the economic agent with more numerous and more pressing challenges. In order to face them and emerge as a
Accounting Costs - SunAir Boat Case The following table shows details of SunAir Boat Builder's molding department's direct cost and overhead variances: SunAir Boat Builders, Inc. Detailed Cost Comparison (per boat hull) Unit Cost per Unit Cost Actual Price Usage Amount Standard Actual Variance Quantity Variance Materials Glass Cloth (sq. ft.) 120 $ Glass Mix (lbs.) 40 $ Unit Cost per Unit Cost Actual Rate Efficiency Amount Standard Actual Variance Quantity Variance Direct Labor Mixing (hrs.)
Many employers use a simple formula to calculate net pay. The formula is as follows: Net Payment Calculation: Employee's gross pay = (pay rate times number of hours worked) minus Statutory payroll tax deductions minus Voluntary payroll deductions = NET PAY As mentioned above employers are also required to report payroll tax obligations in accordance with federal and state law. Below is a list of following responsibilities on the part of the employer. Federal tax
Premier Products The contribution margin is the revenue less the variable costs. We know the price for each product, and we know the variable material costs. Labor costs are also know ($5/hr). Thus, the remaining issue is the allocation of overhead, which the company does on the basis of direct labor hours. Contribution Margin Product Price Materials Labor Overhead Contribution Cont. Margin There are two production constraints. One machine can only be used for A or B, the other machine
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now