FK Millers produces Super and Economy brands of maize flour. In the last quarter of the year of production, the following information about the units and cost of gg SUPER ECONOM Number of produced 20 60 Batch Size 10 20 Direct labor hour per unit 0.03 0.04 Direct labor cost per unit 1500 2000 Direct material cost per unit 1000 2000 Activities overhead costs Setups 20,000 Order handling 30,000 Engineering 39,900 Packaging 70,000 Cost drivers Super Economy Number of setups 2 3 Number of orders handled 2 8 Direct material hours 32 30 Number of units packaged 20 60 . FK Millers’ Management Accountant claims that Activity-based costing provides relatively accurate product cost information. However, the value of activity-based costing information goes beyond precise product costing. When activity-based costing is used in 4 conjunctions with activity-based management, organisations can often make dramatic improvements to operations. FK Millers’ Financial Accountant disagrees with this assertion. The Financial Accountant contends that financial accounting information is sufficient for management control. He further argues that although the ABC system provides more accurate information on manufacturing costs, it does not show up on the financial statements. Required. Using FK Millers case above, resolve the discourse between the Management Accountant and Financial Accountant discussing the efficacy of the ABC information “if it does not appear on the financial statements”.
FK Millers produces Super and Economy brands of maize flour. In the last quarter of the year of production, the following information about the units and cost of gg
SUPER ECONOM
Number of produced 20 60
Batch Size 10 20
Direct labor hour per unit 0.03 0.04
Direct labor cost per unit 1500 2000
Direct material cost per unit 1000 2000
Activities overhead costs
Setups 20,000
Order handling 30,000
Engineering 39,900
Packaging 70,000
Cost drivers Super Economy
Number of setups 2 3
Number of orders handled 2 8
Direct material hours 32 30
Number of units packaged 20 60
. FK Millers’ Management Accountant claims that Activity-based costing provides relatively accurate product cost information. However, the value of activity-based costing information goes beyond precise product costing. When activity-based costing is used in 4 conjunctions with activity-based management, organisations can often make dramatic improvements to operations. FK Millers’ Financial Accountant disagrees with this assertion. The Financial Accountant contends that financial accounting information is sufficient for management control. He further argues that although the ABC system provides more accurate information on
Required. Using FK Millers case above, resolve the discourse between the Management Accountant and Financial Accountant discussing the efficacy of the ABC information “if it does not appear on the financial statements”.
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