Management Accounting Assessment Task - Case Study
Case -
Happy Traveller Ltd. is a manufacturing company which is in the process of determining the product costs using traditional costing system as well as ABC system. Sufficient cost data information is provided in the case so that you are able to derive the product costs of its two main types of upscale luggage. The requirements listed at the end of the case are the main points that your report must cover.
Happy Traveller Ltd has historically had a simple costing system that allocates indirect costs using a single indirect-cost rate. The Company produces mainly two types of luggage, namely Simple luggage and Complex luggage, and undisclosed amount of other types of luggage. The annual overhead costs for the Happy Traveller Ltd, which involves three production centres (two machine centres and one assembly centre) and two service centres (materials procurement and general factory support), are as follows (in attached file).
Required:
1) Perform overhead analysis systematically firstly based on traditional costing system. The overhead analysis under traditional costing system involves two-stage allocation process by assigning all manufacturing overheads to production and service cost centres, and followed by reallocating the costs assigned to service cost centres to production cost centres. Provide the calculations of the manufacturing costs assigned to the two products (Simple luggage and Complex luggage).
2) Perform again the overhead analysis using Activity-based costing (ABC) system. The overhead analysis under ABC system involves assigning costs to activity cost centres. Provide the calculations of the manufacturing costs assigned to the two products (Simple luggage and Complex luggage) based on ABC system.
3) Compare the product costs calculated under the traditional costing system and ABC system and explain the rationale behind the differences in product costs calculated under the two costing systems.
4) Analyse the cost versus benefit considerations in adopting ABC system in Happy Traveller Ltd.
5) Explain in details in what ways the ABC cost management can be applied in Happy Traveller Ltd besides assigning costs to its products.
Your report: There are four sections in your report.
Introduction -
- Explain the purpose of this report
- The significance of traditional costing systems and activity based costing
- Cite references to support your discussion in the section
Discussion -
For Happy Traveller Ltd case, show the workings of the above requirements 1) to 3)
- Requirement 1) traditional costing system
- Requirement 2) ABC
- Requirement 3) compare traditional costing system and ABC
Conclusion -
For Happy Traveller Ltd case, give answers for the above requirements 4) to 5)
Requirement 4) Analysis the cost and benefit
Requirement 5) Apply ABC to the company
References -
Provide a reference list here. You are expected to use journals and textbooks published after 2008. Cite references in Harvard referencing style.
Attachment:- Assignment File.rar