1. A job cost record is used to accumulate all costs related to each specific job: direct material used, direct labor incurred, and manufacturing overhead allocated to that specific job. The job cost records serve as subsidiary ledgers keeping track of the specific jobs being produced by the company. The job cost records for incomplete jobs provides the substantial detail for the total Work in Process (WIP) Inventory account. The job cost records for complete jobs serve as a basis for valuing the Finished Goods Inventory account. Job cost records also provide important information to make many business decisions, such as reducing future job costs, allowing discounts on high-volume sales, and bidding for custom orders.

An ABC system provides managers with more details on production and sometimes, in turn, reveals the high costs of non-value-added activities, such as storing and moving inventories and producing poor-quality products. Many companies have linked their ABC system to a lean operations philosophy, which focuses on manufacturing without waste. The eight wastes of traditional operations have been discussed under DOWNTIME. Lean companies adopt a just-in-time (JIT) inventory philosophy. JIT inventory focuses on purchasing raw materials just in time for production and producing goods just in time for delivery to customers. The quick production and low inventory maintained in a JIT system require a quality product be produced in order to have the product reach the customer in a timely manner.

Our Discussion Questions are:

What is activity-based management and how can it be used to improve the profitability of a company?

How can the need for a more refined costing system be identified?

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not?

How are cost drivers selected in activity-based costing systems?

2. Scenario: Hammond and Jarrett provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours. 

Question 1: Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system. 

Question 2: What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept?

Answer rating: 100% (QA)

QUESTION A 1 Activitybased management ABM is a management approach that uses activitybased costing ABC information to improve the profitability of a company ABM involves analyzing the activities invol... View the full answer