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| Topic: |
Business
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| Number of pages / Number of words: |
5 / 1167 |
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These weaknesses prevent JDCW from accurately accessing its true costs.
Q3. How were the limitations of the existing cost system overcome by the ABC Cost System? What are the implications of the ABC system?
Essentially, with the current cost system, the managerial analysis is highly flawed due to a lack of crucial in-depth cost information, as indicated by:
1) JDCW already had three cost pools with appropriate cost drivers for each;
2) JDCW distinguished variable ("direct") and non-variable ("period") overhead;
3) JDCW did not fall in the trap of charging under-capacity utilization out to current
production levels (i...
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In conclusion, the overhead percentage for Labor using the Traditional system was 205%, the overhead percentage for Labor using ABC was 111%. An implication would be that it would be more expensive to use ABC.
Q4. Compare the cost of the product A103 (See Exhibit 5) under the existing cost system and under the ABC approach...
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