Accounting homework help. Writing Project
Project Information:
You are a manager at PopUp Company, who manufactures toaster ovens. Your company produces two types of toaster ovens: basic and deluxe. PopUp Company currently uses a traditional unit-based costing system; however, you feel strongly the company should switch to an activity-based costing system. You believe this change would provide you more accurate costing information, which would allow for better strategic decision making. You need to prepare a number of documents in order to convince the CFO to change the current cost management system used by your company.
Week 1 Writing Assignment Part 3:
- Prepare a 2 full pages memo addressed to the CFO summarizing your findings, and why you believe the activity-based costing method gives you more useful information to make decisions for the company. Include in the memo at least 4 ratios that you feel highlight your position that activity-based costing is more useful.
Findings
Part 2 was to compute the unit cost of both the basic and deluxe toaster using both the unit-based approach, and the activity-based costing approach.
Unit-based approach
| Basic Toaster | Deluxe Toaster | |
| Prime Costs | $ 20,000 | $ 30,000 |
| Overhead (22*1000) (22*2400) | 22,000 | 52,800 |
| Total Manufacturing Costs | $ 42,000 | $ 82,800 |
| Volume | 20,000 | 5,000 |
| Cost per Unit | $ 2.10 | $ 16.56 |
Activity based costing approach
| Basic Toaster | Deluxe Toaster | |
| Prime Costs | $ 20,000 | $ 30,000 |
| Overhead Cost | 36,164 | 38,628 |
| Total Manufacturing Cost | $ 56,164 | $ 68,628 |
| Volume | 20,000 | 5,000 |
| Cost per Unit | $ 2.81 | $ 13.73 |
Book
Blocher, E, Stout, D., Juras, P., Smith, S. (2019). Cost Management, A Strategic Emphasis 8th ed New York, NY: McGraw Hill