Managerial Accounting Case Analysis Essay

Compare assigned be per product under both methods. Why has Activity-based costing changed the essence costs assigned to each product?By comparing the two cost assigned methods, thither are some differences existed Unit Product Cost Gadgets Smidgets Smadgets Smadgets Traditional be Method 400 1,000 1,350 850Activity-Based Costing Method 590 1,100 760 1,250Overhead Cost Widgets Gadgets Smidgets SmadgetsTraditional Costing Method 200,000 600,000 800,000 400,000 Activity-Based Costing Method 390,000 600,000 210,000 800,000I take time off the main reason for that areTraditional Costing Method use the Overhead Rate (200% of admit labor) and the Activity-Base Costing Method just use the Overhead Cost Drives.As for Traditional Costing Method, the telephoner just accumulate costs into a cost center (Three kinds of costs instantlyor material, director labor, Manufacturing Overhead) , and the Manufacturing command overhead just equals the director labor multiply by 200% , the Overhead Rate. These threesome kind of costs added together we got the total cost, and the total cost divided by the each unit built, we get the last(a) unit product cost, I think it is a rough calculating process. The result depends on the direct labor hours and regardless of any other elements, if direct labor dose not account for a larger portion of the product, the result will not be accurate.In terms of Activity-based costing method, the order use Overhead Cost Drives (There are three allocation bases in the ABC method depreciation, appliance set-up and rent). The Overhead expense just use cost drivers (Such as Machine hours, Set-up hours and Rent) to apply the costs on the products. On the basis of these three, we can get the Overhead cost drives Pool Rate, and we overly get the actual Cost Driver Quantity for Product Line, and finally we can know what is the demand Activity Cost for Product Line with respect products, finally, we got the total ABC Overhead cost for thethree prod ucts. So I think this allocating process is more accurate, because it use the Cost drives into different part in detail.