You are part of a team responsible for implementing an activity-based costing system. Some of the...

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Accounting

You are part of a team responsible for implementing anactivity-based costing system. Some of the members do notunderstand the steps involved in implementing such a system.Prepare a summary showing your team members the steps involved anda brief description of each step that are completed in theprocess.

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Solution The Following steps are involved in implementing the ABC system and Brief Description as 1 Identify the chosen cost objects The cost objects of any organization are the products or services and the goal is to first calculate the total cost of manufacturing and distributing these products and their unit cost 2 Identify the different activities within the organization After the identification of cost objects the main activities which are being performed in the organization have to be identified Usually the number of activities over cost centers in ABC will be much more as compared to traditional overhead system The exact number will depend on how the management subdivides the organizations activities 3 Identifying the direct cost of products The direct cost of products or objects may comprise direct material cost direct labor cost and direct expenses Classification of as many of the total costs as direct costs as is economically feasible should be made It reduces the amount of costs classified as indirect 4 Relating the overhead to the activities After identifying the organizations activities the See Answer

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