Managerial Accounting Case Analysis Essay Example for Free

Managerial Accounting Case Analysis Essayequality designate costs per ingathering under both methods. Why has Activity-based costing changed the hit costs assigned to each product?By comparing the two cost assigned methods, there are both(prenominal) differences existed Unit Product terms Gadgets Smidgets Smadgets Smadgets Traditional Costing system 400 1,000 1,350 850Activity-Based Costing Method 590 1,100 760 1,250 operating cost 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 deduct the main apprehension for that areTraditional Costing Method use the strike Rate (200% of direct labor) and the Activity-Base Costing Method just use the Overhead Cost Drives. As for Traditional Costing Method, the company just accumulate costs into a cost center (Three kinds of costs handler material, director labor, Manufacturing Overhead) , and the Manufacturing overhead just equals the director labor multiply by 200% , the Overhead Rate. These three kind of costs added together we got the total cost, and the total cost divided by the each unit built, we get the final unit product cost, I think it is a rough calculating process. The result depends on the direct labor hours and irrespective of any other elements, if direct labor dose not account for a larger lot of the product, the result will not be accurate.In terms of Activity-based costing method, the company use Overhead Cost Drives (There are three allocation bases in the ABC method depreciation, machine set-up and rent). The Overhead disbursal just use cost drivers (Such as Machine hours, Set-up hours and Rent) to apply the costs on the products. On the flat coat of these three, we can get the Overhead cost drives Pool Rate, and we also get the tangible Cost Driver Quantity for Product Line, and finally we can know what is the exact Activity Cost for Product Line with respect products, finally , we got the total ABC Overhead cost for thethree products. So I think this allocating process is more accurate, because it use the Cost drives into different part in detail.