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costing system.docx - Introduction Almeida and Cunha, 2017...

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IntroductionAlmeida and Cunha, 2017 stated that a costing system is designed to track the costs of abusiness. The framework contains a series of structures, procedures, controls and reportsdesigned to summarize the sales, costs and profitability reporting to management. For each unitor task, supplies, labor and overhead costs shall be compiled. This is the perfect method forspecial goods, including tailor-made devices or consultancy ventures. The method of costaccumulation is highly complex and challenging. Materials, labor and overhead costs arecalculated for the whole production process and then assigned to each manufacturing unit. Itworks well with broad production quantities of the same products, such as 100,000 mobilephones. The method of cost accumulation is highly efficient and can be automated in sections. Tocalculate the cost of a product, we use a combination of job costing and process costing, which iscalled a costing procedure. The work costing aspect is based on the assumption that expenditurescan be applied to such items, i.e. in units of one or very small quantities. The costing aspect ofthe process is based on the idea that the costs of manufacturing a large group of goods are oftendistributed for all goods in that category since they are produced in the same way. The activitybased costing (ABC) is another costing system choice. ABC has been created in response toconcerns that overhead costs are never allocated correctly and requires a more comprehensiveregret to assess how overhead costs are allocated to various costs pools and how costs areallocated to cost items in those pools (Almeida and Cunha, 2017).Part A1)Activity-based costing (ABC)ABC is a technique for allocating operating costs more accurately by assigning them tooperations. The costs which be allocated to the expense items that are used in such operationsuntil the costs are allocated. The framework can be used to minimize operating costs in a targetedmanner. In complex environments where multiple machines and items and complicated processesare available, ABC works best. Inversely, this is less useful if production processes areabbreviated in a simplified setting (Tsaiet al.,2015).Features of Activity Based Costing System
1.Cost recognition. The first step in ABC is to define the costs we would like to delegate.This is the most important step in the whole process as the project scope does not wastetime.2.Load tanks for secondary expenses. Establish an expense pool for the expenses incurredto benefit other areas of the business rather than fund the goods or services of thecompany directly. The material of secondary cost pools generally includes computer andadministrative services and the like (Tsaiet al.,2015).3.Load reserves of prime prices. Creates a collection of costs pools that are similar to theoutput of products or services for these prices. It is very normal for each product line tohave different cost pools, because cost appears to be at this level.

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