Manufacturing companies are constantly looking for accurate costing systems which is instrumental in establishing product/service costs. This helps in determining the companies competitiveness. Whereas costing is internally determined, accounting reports are predominantly driven by external financial reporting. However, inaccuracies of product costs are inevitable. As an adviser, you are aware that the product costing system is a systematic process of accumulating direct and indirect costs in the manufacturing process. It is your objective to find out the actual manufacturing cost in the your case study company. Prior to beginning your task, take an assumption that the company uses the traditional costing system. Under this system, costs are allocated on the basis of machine hours or labour hours (Use only one of the two as applicable to your case study company. Take an assumption of the estimated machine or labour hours and the actual cost incurred. You are also informed that the company will need your advice about the introduction of Activity Based Costing (ABC) as compared to the traditional costing system. Given the competitive nature in the market due to E-commerce and globalization, manufacturing companies have realized the new frontier to achieve this goal is through effective, efficient and accurate costing system. Note that, the inaccuracy of the traditional costing information is impeded in manufacturing companies Required: Identify the latest financial statements of a manufacturing company of your own choice with a view to provide your expert advice on cost management that will ensure the ''effective, efficient and accurate'' cost management objective and answer all the questions below. Your answers for each question should be framed in an ''advisory'' version with theoretical, rational and logical arguments in reference to the cost models and the selected case study company's cost structure. State clearly the assumptions taken, costing models and concepts applied in each respective question

Question is

2. What is/are the cost object/s, the direct costs, indirect costs, fixed costs and overhead costs

3. Determine the Material consumed, Prime cost, conversion cost and total manufacturing cost. (Provide specific assumptions taken. Your assumptions must be logical and consistent with the cost accounting concept you may apply) and the cost per unit of finished product.

4. Based on the appropriate model and costing concepts learned in class, demonstrate with relevant calculations how you have allocated costs. Assumptions taken must be clearly explained.

5. Establish over or underapplied overheads. Why has your calculation established an over or under-applied overheads? What can you advice management on how to rectify this situation in the future cost management process

6. Will the answer to question 5 be different if you determined costs allocation based on normal costing? What if you adopted actual costing? Justify your answer based on literature and illustrations in your workings

7. Determine the case study company cost per unit based on activities as the primary cost allocation base. Explain why the approach you have taken is superior than the traditional costing system?

Answer rating: 100% (QA)

Answer Dear Advisor Thank you for providing the detailed case study and the questions I will provide my expert advice based on the information given and the assumptions made 2 Cost objects direct cost... View the full answer