Management Accounting

MANAGEMENT ACCOUNTING
Answer -1
Costing is the allocation of disbursals related to products. The heart of Overhead is assigning the indirect apostrophize like indirect material goes to material overhead, depreciation goes to the manufacturing overhead. As per the ageing system, they didnt have cost drivers such as prepare treat cost and peculiar(a) component handling cost singly but they are allocating the cost drivers to plan cost and administrative cost and that leads to inefficient results and shows the low cost of per unit of motor. In the old be system, there was difference in the assigning of validate related overhead as compared to the pertly be system. This difference resulted in determining the original manufacturing cost of the motors. The old be system ignored the concept of cost drivers and that resulted in under(a) estimating the cost of motor. The old cost system was employ the cost as engineering costs and special components cost and did not assigned the costs accordingly. In the new costing system, they have established new cost drivers namely order processing cost and special component handling cost. additional component cost is a type of unit take cost whereas order processing cost is classified under batch level cost driver.




They introduced two new natural action cost pools to know the accurate cost of per motor. They reduce the engineering costs and administrative cost by 1.74% & 7.46% respectively and allocated it to new cost pools. In the old costing system, they are allocating special components on average basis whereas in new costing system they are allocating as per the components used in the motors. In the old costing system, they do not have support related overhead. The old system was not able to suppress the relationship between increased support costs and change in product mix where as new costing has easily achieved it. Later on, they also realised that material expense and machine hours required to manufacture the motors was...If you want to get a full essay, order it on our website: Ordercustompaper.com



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