Post 2 substantial replies to classmates or your faculty member that are at least 100 words in length. Be constructive and professional.

Myrna 1. The activity-based costing method allocates the indirect cost to each of its products based on the cost of each activity performed to produce the items and/or services provided. Although this method is a bit more complex to perform, it is a more accurate practice to allocate the indirect cost of the company. On the other hand, the traditional costing system distributes its indirect cost to all of its items and/or services more evenly, usually based on a percentage or rate. The agency I work for does not deal with profit type of activities. The expenditure reporting that we perform is to recover federal and state funds to continue to provide services. Both costing methods are practiced in order to report all direct and indirect expenses as accurate as possible.

If the activity-based costing method is utilized in a restaurant type of setting, such as a local creperie a few blocks away from my home, I would imagine that they would keep track of the number of customers and which items are ordered. This would be an example of the customer level activities. Group level would include the items and machines/equipment utilize to produce an item. Service level would include new items and marketing or advertising costs. As for the facility level, this would include the costs of to keep the building in operation such as the utilities and administrative wages.

Ashley 2. To my understanding, activity-based costing is more specific than traditional costing. Here, in a traditional costing system, there is an overhead rate that is applied to all products. Hence, how traditional costing is more general. As I mentioned, activity-based costing is more specific. This method of costing looks at the actual costs associated with each product, and documents it that way. By doing it this way, the actual cost to the company is accurate instead of estimated. To add, this allows the company to adjust prices in response to changes in cost. In doing so, the company can attempt to stabilize revenues. As previously mentioned, the estimated costs associated with utilizing an overhead rate do not exist when activity-based costing. This is because each activity is broken down and the costs associated with them are documented. Doing this also helps companies monitor expenses.

While applying activity-based costing to a restaurant setting, one can break the customer level by looking at the number of customers and the number of orders accounted for, at the group level by looking at the materials, or ingredients, ordered and the inspection of different products, at the service level by looking at internal and external advertising or at the cost of the restaurants aesthetic, like decor, and at the facility level by looking at utility costs and the costs of overall maintenance.

please respond to those two people. thank you