ABC Costing, accounting assignment help
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- Suppose you are the manager of a widget-production company. The
company’s two support departments, Purchasing and Human Resources, are
currently allocated amongst its three manufacturing departments:
Laminating, Fabricating, and Assembling. Currently, the support
department’s costs are divided equally among the three manufacturing
departments. The company has conducted an analysis using the number of
employees in the manufacturing departments as the activity driver. The
results of the analysis indicate Fabricating would receive 50% of the
total costs of Purchasing and Human Resources, Laminating would receive
30%, and Assembling would receive 20%. As a manager, would you suggest
the firm adopt the new activity-driven allocations or retain the current
allocation method? Choose a method of allocation and provide your
rationale. Identify at least two additional cost drivers that could be
used to allocate the costs of the two support departments and explain
the rationale you used to select the additional cost drivers.
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