If you are doing an activity based accounting assignment, you need to know what activity based costing is. It can be illustrated as an accounting method that is utilized to identify the activities that a firm performs. It recognizes the relation between costs, activities and products. If you need any help with your activity based accounting assignment, you can get best possible accounting assignment help from us.
Basics of activity based costing system
When you are writing an activity based accounting assignment, you need to know what is cost of the product. It is defined by the sum of the costs of all activities required to manufacture and supply those to the customer.
- There is no direct cost related to production
- Activities are consumed by products/ services
- Activity based costing determines costs to products by tracing activity expenses. Each product is charged on the base on the extent to which it is used as an activity.
- The primary objective of activity based costing is to assign costs that reflect the physical dynamics of the business.
- Provides ways to allocate the costs of indirect support resources to activities, business processes, customer and products.
- It recognizes that many organizational resources are required not for physical production of units of product but to provide a board array of support activities.
Advantages of activity based costing system
Our activity based accounting assignment experts state that the usage of activity based costing is especially significant to businesses that provide customized products and services. Our activity based costing assignment further state that a customized production environment requires activity based costing’s allocation of actual indirect costs to the product to identify its real cost. The activity based accounting assignment experts mention few advantages that businesses get by allocating activity based costing system.
- Activity based costing determines product cost more accurately and reliably because it focuses on the cause and effect linkage between costs and activities in the context of producing goods.
- Determines if selling price of multi-products under activity based costing is fair and precise. The reason is overheads are allocated as per the relevant cost drivers.
- Control of overheads consisting of fixed and variable become easier to determine by regulating and monitoring activities. Activity based costing is used to identify the linkage between cost and activities and thus provides opportunities to control overheads costs.
- This system provides sufficient information that is utilized to make the decisions about profitability of different product lines.
- Fair allocation of overheads occupies a considerable portion of the total cost components.
Design and implementation of activity based costing system
When you deal with an activity based costing assignment, you need to gain knowledge as to how the system takes shape and how the businesses execute the system in efficient manner. For activity based accounting assignment help, our activity based costing assignment experts explain the process of implementing the system.
- Step 1 Determine the cost objects (such as A, B, C)
- Step 2 Identify direct costs (for example direct materials, direct labor and direct expenses)
- Step 3 Finalize the cost allocations bases that must be utilized for overhead costs (such as ….of set-ups, ……of units, etc.)
- Step 4 Determine the overhead costs related to the selected bases
- Step 5 Calculate the rate per unit
- Step 6 Compute the overheads cost for allocation to products
- Step 7 Figure the cost of products
Here our activity based accounting assignment experts make you aware of the areas where the activity based costing system should be engineered.
- High overheads
- Product diversity or multiple products
- Customer diversity
- Service diversity
- Stiff competition
If you want to gain detailed knowledge on these areas to make your activity based accounting assignment more effective, our activity based costing assignment experts can provide the best possible accounting assignment help.
Definition of activity drive
Our activity based accounting assignment experts describe the responsibilities of an activity driver. The activity driver is used to determine the linkage between activities and cost objects, such as products, customers. The activity driver is chosen based on the subjective trade-off between accuracy and cost of measurement. You can gain detailed knowledge on this particular subject by taking activity based accounting assignment help from us.
Level of activities involved in accounting based costing system
Our activity based accounting assignment experts explain several levels of activities that companies need to participate while implementing activity based costing system.
- Unit level activities: These involve the costs of direct materials, direct labor and machine maintenance.
- Batch level activities: These are costs incurred every time a group (batch) of units is produced such as purchase orders, machine setup and quality tests.
- Product-line activities: These encompass the engineering changes made on the assembly line, product design changes and warehousing and storage costs of each product line.
- Facility support activities: These are cost relating to the activities which are administrative in nature. For example, building depreciation, property taxes, plant security, outside landscape and maintenance, insurance accounting and support staff’s salaries.
Acquire and use material for containers
Acquire and use material for baby-care products
No. of Containers
No. of products
Set up manually controlled by machines
Set up computers controlled by machines
No. of batches of containers
No. of batches of B. Product
Design and manufacture moulds
Use manually controlled machines
Use computer controlled machines
No. of moulds required
Product type (containers)
Product type (B.Products)
Consider customer opinions
Provide warehousing for customers
No. of consultations
No. of cubic feet
Salaries of the employees
Challenges faced while implementing activity based costing system
After the reading the above information offered by our activity based costing assignment experts, you must have understand how activity based costing system is executed along with various activities. Here our activity based accounting assignment tutors give the knowledge of what challenges businesses may counter while implementing the process of activity based costing. This way you can give detailed information in activity based costing system assignment. Our activity based accounting assignment writers are always there to help you out.
- The higher management must approve the initial plans for implementing activity based costing system. The job starts with making inquiries from employees.
- The design and implementation of activity based costing system should be taken care by a cross functional team of technicians. Generally, the team involves the representatives of accounting, finance, IT, marketing, production and engineering departments.
- The consultant, who takes care of the activity based costing services, must be hired in order to prevent the wastage of resources and time.
- Selection of activity based costing software that could implement and initiate the processing of the system should be made upon expert advice.
Indicators of need for activity based costing
Our activity based accounting assignment writers define few indicators that point whether there is a need for activity based costing system implementation. You can opt for activity based accounting assignment help from the experts to get detailed knowledge. The activity based costing system should be employed when,
- Direct labor is a small percentage of total costs
- Product-line profit margins are hard to explain
- Sales are increasing, but profits are declining
- Line managers do not support the product costs reports
- Marketing team does not use cost reports for making pricing decisions
- Some products that have reported high-profit margins are not sold by competitors.
Limitations of activities based costing
Our activity based accounting assignment experts indicate some limitations on activity based costing that the businesses counter. These are as follows below:
- Difficult to identify the overall activities that influence costs
- Not easy to select the most suitable cost drive
- Difficult to evaluate the cost on the basis of activities
- Not suitable for small manufacturing concerns
But this should be remembered that when you are dealing with an activity based accounting assignment, you need to give theoretical information along with calculations. So only an activity based costing system assignment expert can help you in this regard.
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