Currently, you work at Active Quality Sportswear (AQS), which manufactures sport attire for men, women, youth, and children. You're a senior accountant in the accounting department and have been with the company for five years. Since the company's inception seven years ago, AQS has operated under a traditional costing system based on machine hours. Company growth has really taken off in the last two years. Jacob Jones, the controller hired last year, is always open to new ideas. In fact, he welcomes communications to discuss how the company is doing and what, if anything, the company could or should be doing differently. This is your chance to make a good impression on the controller and management! It is your understanding that Wendy Shaw, the company CFO, has submitted paperwork for retirement. Therefore, there will be opportunities for people to move up or change positions within the company. You would have an interest in the controller position. You want to propose to the current controller the idea of evaluating AQS's costing system. Perhaps, it is time for a change. You briefly mention your idea to the controller. Jacob is excited about your initial comments and asks that you send him something in writing. The controller asks that you put your ideas in a memo to him. In turn, he will consider and include you on more research/analysis for the two of you to present to the senior management of the company.

In consideration of the background, prepare a memo in a Word document to submit to the controller. Compare a traditional costing system with an Activity-Based Costing (ABC) system. Include the similarities, differences, advantages, disadvantages of the two costing systems. Why are you suggesting the costing system be evaluated now? What do you feel this could mean for the company?

Answer rating: 100% (QA)

Answer The differences are in the accuracy and complexity of the two methods Traditional costing is ... View the full answer