You are the new cost accountant for ABX Corporation. After careful review of the company’s operations you have been tasked to determine the company’s break-even point, the numbers sold to meet the company’s target profit and contribution income statement for both outcomes. Management has also asked that you provide the pros and cons for variable, traditional and activity-based costing method. After providing the pros and cons of each method recommend one method for the company’s use and support your discussion. Company’s Data: ABX Corporation sold 450,000 units at $75/unit. Fixed cost are $5,300,000 per year. Variable costs are $45 per unit. ABX Corporation desires a target profit of $6,500,000 per year.

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.