Activity Based Cost Accounting Assignment Help
Activity based costing or activity based cost accounting assignment help focuses on the criteria of activity based costing. To understand the concept of activity based costing, one need to first make the concept of ‘cost accounting’ clear in mind!
Cost Accounting is the process of recording, classifying, analyzing, summarizing, allocating, and evaluating the alternative actions for the control of cost in a firm or a manufacturing unit. To alert or to advise the management team of the firm about the detailed information of cost efficiency & capability and further forms the basic goal of cost accounting. This information creates an opportunity for the management team to cope-up with the factors resulting in the high or low cost for the production and plan for the future operations accordingly. This type of accounting information is used in financial accounting but it is only in hands of manager to deal with such issues and make related decisions.
Activity based costing is an approach of cost accounting. Just like cost accounting that provides information about the cost being used in the firm, activity based accounting gives information about the cost being used at each activity level or the working level. Activity based costing assign an indirect cost to a product which could equate the cost of products made in bulk. This approach is usually used by manufacturing units or sectors to calculate a true cost of production per unit so that the bulk production cost couldn’t affect the firm.
Activity based costing assignment help concentrates on activity based costing that further focuses on the certain objectives and theses objectives are:
- Identify the products that are costing more for a manufacturing unit or company and creating non-profit able results.
- Elimination of such products that are non-profit able for a company or assigning a minimum cost for the production of such products
- Identify and eliminate the production of the products that are ineffective in the overall profits of the company and allocate for the different concepts that could yield to higher production of the sane product with an effective profitable results.
Thus, with the help of activity based costing, a business organization assigns resource cost to the products through a number of activities creating a profitable opportunity for the whole organization. The work of the team assigned for such purposes is only limited to the information gathering and providing it to the managing authority or the manager.
EXAMPLE FOR ACTIVITY BASED COSTING: Imagine a drug producing company (ABC) which produces drug A and drug B. For the production of drug A the company need help of large machines, covering a large space of the manufacturing unit while the drug B need only small area and little man power for its production. Now consider that the manufacturing unit has setup equal wages for all staff members or the labor i.e. a total cost of $2 million/year on the whole staff. And if in a year the ABC manufacturing unit produces 10 million units of drug A and 90 million units of drug B. This means that only 10% of $2 million staff will be allocated for the production of drug A and 90% of that of drug B which will only increase the unit cost of drug B. Thus, under activity based costing more realistic estimation is made for the cost production of each drug. By the use of the methods of activity based costing, 75% of staff costs are allocated to drug A and only 25% to drug B.
Activity based costing typically uses large amount of data to set a true cost production whole assigning an affordable price for each level that will also be beneficial for the overall company’s profit. And thus most of its stress is on accounting of the whole data. Consequently, a well-defined staff and team will be needed for such purposes. But looking at the extra costs for applying the approach, most of the companies do not actually follow this because the cost of affording the long data and implementing the approach further exceeds the profits made by such approach. While the Chartered Institute of Management Accountants (CIMA) has defined this approach as costing and monitoring the activities which could involve the useful final outputs.
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