Management Accouting Essay Example | Topics and Well Written Essays - 1500 words

Management Accouting - Essay Example(Accounting Tools)If a social club produces 2 different products namely Pi and chi, the Company has cost of command overheads which is 500. The go with can allocate the cost on the basis of material cost of each product. If material cost of each of Pi and ki is 200 and 300 respectively then the apportionment will be as followsIn this manner acting the indirect and overhead be are apportioned by allocating proportionate costs to the products. The indirect costs can be apportioned by proportionate allocation on the number of units etc.If a fellowship produces two products, Pi and Chi. The Company may apportion the overheads on a proportionate basis, by apportioning the cost on basis on ratio of 23. If the total budgeted cost is 10,000.This method allocates the overhead costs to the manufacturing cost of products. The rates of absorption are used as benchmarks by the company and can be labor hour, machine hour or any other rate which suits th e companys overhead absorption.If the company is produces a product which requires labor for the production, then the company may kick in labor hours of direct labor cost for the basis of absorption of the overheads to the cost of the product.If a company absorbs the overhead cost at a rate of 10 per machine hour and the produces two products i.e. Pi and Chi and the products require 200 and 300 machine hours respectively then the company may absorb the overheads as follows.The traditional approaches to cost of the overheads has not been beneficial to the companies as these approaches are unable to provide the accurate allocation of the manufacturing and overhead costs to the products as per their actual share.Activity-based costing (ABC) is a modern and more established costing model which is used to allocate the costs that are attributable to the activities according to the usage of respective resources in accordance