ACCT 301 SEU What Process Is Used to Assign Costs in An Abc System Questions

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Business Finance

ACCT 301

Saudi electronic university

ACCT

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1- What process is used to assign costs in an ABC system? Provide numerical example.

2- How is relevant quantitative and qualitative information used in special order decisions? Explain and analyze using numerical example.

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Explanation & Answer

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College of Administrative and Financial Sciences

Assignment 2
Deadline: 20 /03/2021 @ 23:59 (End of week 9)

Course Name: Cost accounting

Student's Name:

Course Code: ACCT 301

Student's ID Number:

Semester: 1

CRN:21919
Academic Year: 1441/1442 H

For Instructor's Use only
Instructor's Name: Dr. Youssef RIAHI
Students' Grade: Marks Obtained / Out of

Level of Marks: High/Middle/Low

Instructions – PLEASE


The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.



Assignments submitted through email will not be accepted.



Students are advised to make their work clear and well presented, marks may be reduced for
poor presentation. This includes filling your information on the cover page.



Students must mention question number clearly in their answer.



Late submission will NOT be accepted.



Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.



All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).



Submissions without this cover page will NOT be accepted.
Page 1 of 4

Q1. What process is used to assign costs in an ABC system? Provide numerical examples.
(2.5 Marks)
To use activity-based costing, you must understand the process for assigning costs to
activities. First, identify which activities are necessary to create a product. Then, separate each
activity into its cost pool, a group of individual costs associated with an activity. Determine the
total overhead of each cost pool (Kenton, 2020). For example, purchasing could be in its cost pool.
Next, assign activity cost drivers to each cost pool. Cost drivers include; units, hours, parts, etc.,
that control the changes in costs. For example, purchasing costs are driven by the number of parts
purchased. Divide the total overhead in each cost pool by the total cost drivers to get your cost
driver rate. Lastly, compute how many hours, parts, units, etc. that the activity used and multiply
it by the cost driver rate. ABC systems can be complicated. Check out this example to help further
illustrate the process.
Example
Let's figure out how much you are spending on utilities to create a product. To do this, you
estimate that your total utility bill is $20,000 for the year. You determine that the cost driver
impacting your utility bill is the number of direct labor hours worked. The number of direct
labor hours ...


Anonymous
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