Explore BrainMass
Share

Explore BrainMass

    Activity based costing

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Importance of Manufacturing Overhead Allocation
    The percentages of product costs comprised by direct materials, direct labor, and manufacturing
    overhead for three companies are as follows:
    Company A Company B Company C
    Direct materials . . . . . . . . . . . . . . . . . . . 7% 21% 42%
    Direct labor . . . . . . . . . . . . . . . . . . . . . . 13 42 49
    Manufacturing overhead . . . . . . . . . . . . 80 37 9
    100% 100% 100%
    Based on this information, which of these three companies would probably improve its product
    costing accuracy most by converting to activity-based costing (ABC)? Explain your answer.

    © BrainMass Inc. brainmass.com October 9, 2019, 8:53 pm ad1c9bdddf
    https://brainmass.com/economics/labour-economics/activity-based-costing-165961

    Solution Preview

    Hi,

    Company A will get most benefit by implementing ABC.

    ABC helps allocating non-traceable costs. Direct material and direct labor ...

    Solution Summary

    Solution explains which of the given companies can improve its product costing accuracy most by converting to activity - based costing (ABC).

    $2.19