Overview: Classifying a company’s costs allows for an in-depth analysis of the impact that changes in output have on revenues, costs, and net income or net loss. A cost-volume-profit analysis will be completed in order to determine the breakeven point. Relevant costs will be used to prepare a flexible budget. Additionally, an appropriate costing system should be selected and the choice should be substantiated with reasonable rationale. Finally, a memo should be prepared for management that summarizes the results of the quantitative analysis and makes recommendations for an optimal costing system to be ethically used by key decision makers.
For Milestone Three, you will make a recommendation to the MDE management team on whether the company should switch from process costing to activity- based costing (ABC) for the bird feeder division. This is an exploratory discussion, but management would like to know more about the differences between the two costing systems and if a different costing system might work better for the company. Submit a 2–3 page Word document that addresses all of the critical elements below of Section III.
Specifically, the following critical elements must be addressed:
III. Main Costing Systems – Activity-Based Costing vs. ProcessCosting
a) Identify the cost allocation system that would benefit this company most. Justify yourresponse.
b) Does this cost allocation system meet management planning and control goals?Explain.
c) What are the ethical implications that should be considered with this cost allocationsystem?
Guidelines for Submission: Your paper must be submitted as a 2–3 page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins.
Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions.
|Needs Improvement (75%)
|Not Evident (0%)
|Main Costing Systems: Cost AllocationSystem
|Identifies the cost allocation system that would benefit this company most and justifies response
|Identifies the cost allocation system that would benefit this company most but does not justify response
|Does not identify a cost allocation system
|Main Costing Systems: Goals
|Determines if cost allocation system meets management planning and control goals and explains response
|Determines if cost allocation system meets management planning and control goals but does not explain response
|Does not determine if cost allocation system meets management planning and control goals
|Main Costing Systems:Ethical Implications
|Identifies ethical implications that should be considered with recommended cost allocation system
|Identifies ethical implications that should be considered but implications do not align with recommended cost allocation system
|Does not identify ethical implications
|Main Costing Systems:Direct Costs Versus IndirectCosts
|Describestheethicalimplicationsofdirect costsversusindirectcostsanddetermines what considerations should be made when selectingone
|Describes the ethical implications of direct costs versus indirect costs but does not determine what considerations should be made when selecting one
|Does not describe ethical implications
|Articulation of Response
|Submission has no major errors related to citations, grammar, spelling, syntax, or organization
|Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas
|Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas