activity based costing

1)A consulting company that provides software and services relating to business intelligence and analytics has a library of customer success stories on its website at Select and read one of the success stories relating to Activity-Based Management. Summarize the success story, and relate the ideas of the article to what you have learned this week in this course.2)The State of Rhode Island publishes its budget and the supporting information at Access the budget and answer the following:? What are the duties of the budget office? (Hint: Use the Primer link.)? What are the six governmental functions listed in the budget?? What are the major sources of Rhode Island?s revenues?? What is the accounting basis used in the preparation of the budget? (Hint: Use the Primer link and scroll down until you see the Budget Basis section.)? The budget mentions four categories of program performance measures. List them, and briefly describe how they are used in Rhode Island. (Hint: Use the Primer link and scroll down until you see the Program Performance Measures section.)? What did you learn from reviewing the most recent budget of the State of Rhode Island?What do you think the biggest challenges are when it comes to preparing their budget?CLICK HERE FOR MORE INFORMATION ON THIS PAPER? PRICE?..Summary of notes from readings activity based costingTraditional cost accounting methods suffer from several defects that can result in distorted costs for decision-making purposes. All manufacturing costs?even those that are not caused by any specific product?are allocated to products. Nonmanufacturing costs that are caused by products are not assigned to products. And finally, traditional methods tend to place too much reliance on unit-level allocation bases such as direct labor and machine-hours. This results in overcosting high-volume products and undercosting low-volume products and can lead to mistakes when making decisions.Activity-based costing estimates the costs of the resources consumed by cost objects such as products and customers. The activity-based costing approach assumes that cost objects generate activities that in turn consume costly resources. Activities form the link between costs and cost objects. Activity-based costing is concerned with overhead?both manufacturing overhead and selling and administrative overhead. The accounting for direct labor and direct materials is usually the same under traditional and ABC costing methods.To build an ABC system, companies typically choose a small set of activities that summarize much of the work performed in overhead departments. Associated with each activity is an activity cost pool. To the extent possible, overhead costs are directly traced to these activity cost pools. The remaining overhead costs are allocated to the activity cost pools in the first-stage allocation. Interviews with managers often form the basis for these allocations.An activity rate is computed for each cost pool by dividing the costs assigned to the cost pool by the measure of activity for the cost pool. Activity rates provide useful information to managers concerning the costs of performing overhead activities. A particularly high cost for an activity may trigger efforts to improve the way the activity is carried out in the organization.In the second-stage allocation, activity rates are used to apply costs to cost objects such as products and customers. The costs computed under activity-based costing are often quite different from the costs generated by a company?s traditional cost accounting system. While the ABC system is almost certainly more accurate, managers should nevertheless exercise caution before making decisions based on the ABC data. Some of the costs may not be avoidable and hence would not be relevant.vCLICK HERE FOR MORE INFORMATION ON THIS PAPER? PRICE?..Summary from readings profit planningThis chapter describes the budgeting process and shows how the various operating budgets relate to each other. The sales budget is the foundation for profit planning. Once the sales budget has been set, the production budget and the selling and administrative expense budget can be prepared because they depend on how many units are to be sold. The production budget determines how many units are to be produced, so after it is prepared, the various manufacturing cost budgets can be prepared. All of these budgets feed into the cash budget and the budgeted income statement and balance sheet. The parts of the master budget are connected in many ways. For example, the schedule of expected cash collections, which is completed in connection with the sales budget, provides data for both the cash budget and the budgeted balance sheet.The material in this chapter is just an introduction to budgeting and profit planning. In later chapters, we will see how budgets are used to control day-to-day operations and how they are used in performance evaluation.Review Problem: Budget SchedulesMynor Corporation manufactures and sells a seasonal product that has peak sales in the third quarter. The following information concerns operations for Year 2?the coming year?and for the first two quarters of Year 3:? a. The company?s single product sells for $8 per unit. Budgeted sales in units for the next six quarters are as follows (all sales are on credit): ? b. Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company?s balance sheet showed $65,000 in accounts receivable, all of which will be collected in the first quarter of the year. Bad debts are negligible and can be ignored.? c. The company desires an ending finished goods inventory at the end of each quarter equal to 30% of the budgeted unit sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand.? d. Five pounds of raw materials are required to complete one unit of product. The company requires ending raw materials inventory at the end of each quarter equal to 10% of the following quarter?s production needs. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand.e. The raw material costs $0.80 per pound. Raw material purchases are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2, the company?s balance sheet showed $81,500 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year.CLICK HERE FOR MORE INFORMATION ON THIS PAPER? PRICE?..

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