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abc costing
NAME SIBONGILE MOREBLESSING

NAME HEAVENS

SURNAME MAPIYO

STUDENT NUMBER P0128855B

PROGRAMME BUSINESS MANAGEMENT

COURSE ACCOUNTING 2B

COURSE CODE CAC 2206

LECTURER MR D MADZIVANYATI

DUE DATE 07 FEBRUARY 2014

1(a)

TRADITIONAL ARBSORPTION COSTING STATEMENT

DETAILS COST PER SYSTEM

Systems Mist cooling Water mist

OAR
$1500/hrs
Variable cost $ 1 450,00 $ 1 254,00

Fixed Overhead cost $ 4 500,00 $ 5 400,00

Total unit cost $ 5 950,00 $ 6 654,00

Traditional Absorption Costing Income Statement per unit

Mist cooling Water cooling
Total
Selling Price [ unit cost X (1+0.10)]

$ 6 545,00 $ 7 319,40 $ 13 864,40
Unit cost

$ 5 950,00 $ 6 654,00 $ 12 604,00
Gross profit

$ 595,00 $ 665,40 $ 1 260,40

(b) ABC is an approach to costing that identifies individual activities as fundamental cost objects. It uses the cost of the activities as the basis for assigning costs to ultimate cost objects such as product or service. It also involves monitoring of activities which involves tracing resource consumption and costing of final outputs and it also uses some cost drivers as absorption basis. A cost driver is any factor that causes a change in the cost of an activity.

Benefits put forward for activity based costing is that


Bibliography: Charles T Horngen & Allan George Foster; Cost Accounting; 6th Edition; Prentice Hall Frank Wood & Allan Sangster;2008; 11th Edition; Prentice Hall
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