Sneakers Unlimited

Traditional costing methods is the process of determining a unit cost by lumping indirect costs of manufacturing together and then parceling out by volume, number of units, machine hours or direct labor hours. Indirect costs

Actual costing is rarely used because managers can’t wait until the end of the year to obtain product costs. Information about product costs is needed as the year goes for planning, control, and decision making.

Activity-based costing (ABC) methodology is an instrument designed to provide accountants and managers with valuable costing information that will allow them to make sound strategic decisions. It is used as a secondary methodology rather than a replacement for the company’s primarily costing system. The ABC methodology identifies activities in an organization and for each activity it assigns a cost. The cost reflects the actual resource consumption by each activity that has been identified.

Standard costing cannot be applied in the case of a concern where non-standardized products are produced: - An important issue that requires consideration in the adoption and application of standard costing and variance analysis system is the issue of having a standardized product peculiar to organizations. In a situation where by an organization is not engaged in the production of a standardized or identified product, the application of a standard costing system cannot be

Although this system is preferable, it has some disadvantages. First, refined costing systems require more information about the nature of the costs involved, and often gathering this information results in additional costs for the firm. Second, even with a broad range of data available, some averaging and estimations are still necessary. So, without outside motivation, such as the MFMPA, small firms retain simple costing systems.

Before the emergence of this particular culture, the consumption of sneakers or shoes are basically for working purposes, walking or even for sport activities. Back in the days, the society only has to own one pair of sneaker which is merely to wear it until it worn out. This is because sneaker is one of the essential attire that each and every one of the society must own in order to use it every single day. Since the industrial revolution, sneakers were produced cheaply as it becoming a popular form of footwear. “Sneakers have always been a popular form of footwear since the industrial revolution when rubber was readily available and sneaker production was cheap and efficiently produced by the masses.” (Cunningham, 2008: 1).

We will examine the given data from the case and compare the unit costs from the company’s current costing system (traditional costing) and from activity-based costing. We will also highlight other qualitative data in consideration with the numerical factors that may result to a significant change on our recommendation.

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

JDCW employed a traditional standard costing system throughout its operations. This form of costing permeated the industrial era, which was categorised by low overhead costs and the production of a limited variety of goods. Standard costing involves allocating overheads to cost objects using volume based cost drivers, such as machine or labour hours. Albeit easy to implement and understand, this system frequently results in over costing and under costing.

Activity-based-costing (ABC) system find activities as the drive for each cost, calculate the average cost per driver’s activity, and times budgeted activities for budgeted cost. It is worth mentioning that ABC system is not used to find problems in cost records, or predict future cost based on that.

INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to

It consists of weighting and combining the weights of the ten factors and to evaluate implementing ABC. The potential benefits of ABC can be analyzed in advance along two separate dimensions. And there are ten mediating factors (Pricing Diversity, Support Diversity, Common Processes, Cost Allocation, Growth of Indirect Costs, Pricing Freedom, Fixed Expense Ratio, Strategic Considerations, Cost Reduction Effort, Analysis Frequency) can guide management in determining the answers. The fist five factors (PD, SD, CP, CA, FG) based on the probability. The second dimension of the model seeks to establish decisions. lY axis potential for ABC due to cost distortion---PD.SD.CP.CA.FG lX axis proclivity to use cost information in decision---PF.FE.SC.CR.AF To start management must analyze and responses to two key questions: 1. For a given organization, is it likely that ABC will produce costs that are significantly different from those that are generated with conventional accounting, and does it seem likely that those costs will be "better"? 2. If information that is considered "better" is generated by the system, will the new information change the dependent decisions made by the management? After finish these questions managers of company can discuses the ten factors that support or reject implementation. Finally, the combined weighted scores are plotted as a point on one of the four quadrants of a graph.Plotting the Answers--- Use Contingency Grid Method The steps in the

The best shoe that ever created by Nike is the Air Force 1 designed by Bruce Kilgore which were inspired by the American presidential plane. These sneakers were the first to use “Air Technology”. They are offered in low, mid and high-top shapes. They were also the first Nike Basketball shoes to feature the “pivot Pint” technology. There are over 2000 different versions of these shoes and they happen to be the best selling Nike’s of all time. It’s a classic that just won’t go away and sneakerheads are always looking for a great pair that everyone missed.

The keen competition requires companies to consider the cost variable. But traditional budgeting method separates the cost into variable and fixed, put the emphasis on the variable cost and consider the fixed cost implacable.

2. What are the stated objectives when ABC is designed and how does the actual design and implementation of ABC conforms to these stated objectives? (Agbejule, 2006, p. 42)