Management Accounting Case Analysis

1785 Words Jan 6th, 2018 7 Pages
This report will explain what an ABC system is, what type of companies benefit from such systems and discuss the strengths and weaknesses of such systems. The report will address the CFO's questioned outlined in this case analysis.
Introduction to Case
This case involves a midsize hardware manufacturing firm, Rubrics Corporation. The CFO in the corporation gained knowledge of an ongoing imbalance between the budgeted and actual costs of the project. The corporation had normally allocated overhead to products using a single direct cost driver, usually direct labor hours or direct labor dollars which resulted in inaccuracies. The traditional costing resulted in discrepancy between the budgeted overhead and the actual overhead used. The CFO desires to examine Activity Based Costing to determine the project's budgeted versus actual costs. Towards this end this case analysis will conduct a review of literature on traditional versus Activity Based Costing and then perform Activity Based Costing.
Literature Review
The work of Cooper and Kaplan entitled "Measure Costs Right: Make the Right Decision" relates that managers in companies that sell multiple products have important decisions to make concerning…