Zauner Ornaments Case Analysis

Overhead costs are not in proportion to the production output because of the method they are using. This leads to inaccurate pricing and costing decisions. An Activity Based Costing System would help find the real relationship between the products produced and overhead.

Wilkerson employs a Normal Cost System, which means that they use predetermined overhead rates along with actual costs for direct material and direct labor. Normal costing systems are appropriate when overhead costs are a relatively small percentage of total manufacturing costs and product diversity is limited. For Wilkerson, normal costing does not make sense. Overhead costs make up over 50 percent of total manufacturing costs and their product offering is relatively more diverse. This indicates that the current accounting system in place may be distorting costs significantly. Supporting data:

An in depth analysis of the current costing methods used by the beverage distribution company, Johnson Beverage Inc.

Businesses – from manufacturing, merchandising and service industries alike – take careful considerations for their costing systems. Setting-up competitive prices in the market can be a result of proper costing methods. 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 Zauner Ornaments are currently using and upon conclusion, it will enable us to distinguish the advantages and disadvantages of each costing method.

Nowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The

The current method of apportioning production overheads based on direct labour hours can be described as a traditional approach to product costing. In a manufacturing company’s financial statements, each item produced must be allocated some of the production overheads to make the statements compliant. Sometimes the individual costs of these items can be calculated incorrectly based on overall production overhead and the system of allocating in place, however the overall financial statement can still be accurate. This traditional method of allocating the production

Besides this there are certain advantages of cost accounting to the management i.e. it helps in price fixation, in revealing profitable and unprofitable activities, idle capacity, in controlling cost and also helps in inventory control.

While all three costing method would work for a newly existing company in various areas, the actual costing method would be best for the first few years. The reason for this rationale, is that the company is new to the business environment and it would take some time for managers to acclimate their operations and production levels. As time passes, managers will have to change their strategy to the normal costing to avoid losing consumers to its competitors. Firms’ have to be able to reduce costs for their products and services, without losing the quality of the products (Apak, 2012).

Item Costing System is a vital choice which ought to be made intelligently, generally picking a wrong strategy for the item costing might push the organization towards enormous measure of misfortune. Along these lines, a legitimate methodology ought to be taken after with point by point examination. In the event that we neglected to incorporate the essential cost in the item and think little of the cost and

Accounting to determine which items or jobs are generating the most net income can be extremely important to financial managers in today’s economy. Managers must determine which products are making performing the best so that they can capitalize on profits. This also helps to know when it should cut its losses. There are three very useful methods of identifying costs associated to a particular item which are job order costing, activity based costing (ABC), process costing. Job order costing isolates costs to a particular job. ABC compares multiple items which are manufactured. Process costing assesses items which are massed produced and provides analysis to the cost through the various stages from beginning to completion. This essay will explain each of these methods and then provide examples for each of them.

The ABC costing system is a technique in cost management. Activity Based Costing aims to reduce costs while at the same time enhancing product quality. Managers use ABC to identify how resources uses cost differently and then determine areas which need continuous improvements. When a unit is produced, unit level activity is done. After a whole batch is doe every time, batch level activity is undertaken for the company. For effective production process, we allow facility sustaining activities in the company. Service industries consist of different services which take different levels of resources. The existence of regulation and stiff competition in the service industry do determine the costing system to be used in the

In this following document you will find 4 different job costing activity’s and for each of these I will be using a appropriate costing system for each .Also I will be explaining when a Company would use job costing, process costing, marginal and activity based costing. And I will be detailing the advantages/disadvantages of each method.

Over the years, many of our managers and higher officials have had trouble making business decisions due to the way our P&Ls were structured. We faced several challenges when trying to negotiate with our customers because we were unable to show a cost break down which took into account every aspect of the production process. Although, there are some advantages with the traditional costing approach, such as it aligns with general cost accounting principles, ease of implementation in companies that provide a specific product, it had several drawbacks, such as:

Cost accounting information play a crucial role for manufacturing organizations in making internal decisions. It is important for management to understand the cost implications of any decisions that they make for their organizations. Managerial accounting under which cost accounting lies, provides the management with a break-down of internal manufacturing and operational costs that help them in making the right decisions for their organizations. Some of the decisions that are made using cost accounting information include pricing decisions, production quantity decisions and inventory management decisions. It is important for manufacturing firms to monitor internal costs and control them in order to realize profits. This presentation will

In this paper we extend the costing approaches and the two different approaches which include Variable costing and Absorption costing. This paper explains the difference between variable costing and absorption costing. All successful companies around the world use a strategic business plan that leads to a tactical plan and an operation plan which lead to the execution; both of the costing approaches, variable and absorption costing, to help their business flourish. Variable costing and absorption costing are not to be substituted for one another since both the approaches have their own benefits and limitations to any unique situation. In this document we will discuss the different approaches variable and absorption costing uses, the