Table of Contents
Overview
Companies choose their costing method based on their business activities and processes and the products and services they offer. A company can be manufacturing, merchandising, or service organization; this also impacts which costing method will most benefit its purposes. As a part of the cost, the company also needs to classify overhead costs using either traditional or activity-based costing (ABC).
In this written assignment, you will choose a company, consider its business and cost requirements, and recommend a costing system that will work best for the business.
Prompt
Think about a company you know. This could be a current or past employer or a company you admire. Consider its business activities and the type of products and services offered. Based on what you have learned so far, write a short paper reflecting on the different costing methods and speculating how they might apply to your selected company.
Specifically, it would be best if you addressed the following rubric criteria:
- Company Overview: Identify the company you selected and provide a brief overview of its business.
- Is it manufacturing, merchandising, or service organization?
- Costing Methods: Compare the job order and process costing methods, and explain how each of these can be applied to the company.
- How could the costs differ if one method is chosen over the other?
- Factory Overhead: Outline possible indirect or overhead costs the company may need to account for and identify the costing the company might use for these costs.
- If the company decides to use activity-based costing (ABC), what are some activity bases (cost drivers) it might use to allocate these costs?
- Recommendation: Based on your analysis, recommend a costing method for the company, and explain why you think this method will work best for the business.
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