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Product Costing - Traditional Methods and Activity Based Costing case assignment 5 accounting - Essay Example

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The case study is about John and Mary Farmer who own a total of 1060 acres of planted corn and soybeans corps and are intending to include a managerial accounting system. The couple grows these crops for the cash markets rather than the seed crop or speciality crops. The case…
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Product Costing - Traditional Methods and Activity Based Costing case assignment 5 accounting
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Product Costing - Traditional Methods and Activity Based Costing case assignment 5 accounting

Download file to see previous pages... The proposed solution will prove to be very useful for the agricultural enterprises which mainly aim at employing management accounting techniques (Hicks). Considering the fact that the total ownership is focused on a particular crop which grows for a certain amount of time in a year, it is essential that the cost and profit centres are set up as they would provide the couple with a chance to make more accurate costing as well as improved pricing. This will also help the couple improve the profitability of the farms as well as ensure better management and more informed decision making for the farm. On the whole this will lead to more effective and efficient management of the farm. It is also important to note that the schematic will provide a chance for the developer to all the activities and also recognise the drivers which can be used effectively as the input values for the activity based costing systems.
It is also important to note that including the cost and profit centres solutions will prove to be very beneficial for the company and will also permit the company to very effectively and accurately conduct the costing for the produces. Also the financial statements that have been provided are very helpful and beneficial for the farm to develop and design the management accounting systems and all reports effectively and efficiently. Since the proposed scheme of the relationship between the profit and cost centres are complex, it is essential to note that the possible scheme will prove to be very effective and will also be more beneficial than the basic provides (Beaulieu and Lakra). The fact that the cost centres provide support and assistance to each other has not been considered in the scheme and this leads to unrealistic solution. In a real world scenario, the cost centres will provide support and back up to each other and also in some cases to the profit centres.
According to Business Dictionary Activity Based Costing, “Cost accounting approach ...Download file to see next pagesRead More
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