Subject:Recommended alternative for tracking cost of Dog Food Products
The cost accounting is an integral concept in the field of accounting. The process of costing is comprised of accumulation, analysis, summarization and assessment of various possible ways to record and track the related transactions. The main agenda of this memorandum is to provide the higher officials including CFO a short report pertaining to the most effective method of recording and tracking cost of our main product that is dog's food. This approach certainly helps management in making most appropriate action in order to maximize the cost effectiveness and efficiency within the organization (Vanderbeck, 2012).
This information shall be helpful for management to control the existing set of operations and make future based plans accordingly. The literature of cost accounting field has revealed and researched regarding various methods of cost accounting systems. As a result of flailing the given task, I would like to shed light on the analysis being done for tracking the cost of main product by using plant wide rate, and activity based accenting.
The data used to evaluate the total cost per using different costing methods is showed below in tabular form:
Total Overhead Costs
Basic Dog Food
Premium Dog Food
Bags of Dog Food Produced per Year
Direct Labor Hours
The cost of product can be calculated by sing a plant wide rate on the basis of direct labor hours is as follow:
Part 1: Calculation of Plant wide rate
A plant wide rate used in this case represents pre determined overhead rate that remains same while calculation with respect to all departments of the business. It is used when the product is homogenous/ It is calculated by using the following formula:
The total cost for each product per unit is calculated as below:
Total Unit Cost
The activity-based costing system (ABC) is based on activities consumption of resources and products consume activities, which is to show enterprise to provide a certain quantity of products or services that consume human, material, technology of such natural resources as activities (Kim 2009). This is the link resource cost to products. According to this, it can set up the cost pools, then as the quantity of activities to sum up the total cost of activities, calculate the product total and per-unit.
The total cost per unit for basic and premium product using activity based costing system is as follow:
Total cost for overheads
Total units produced
Total Cost per unit
(Hansen, et al, 2009)
In the activity-based costing, the short-term variable costs ...