Management accountant Assignment Example | Topics and Well Written Essays - 2000 words

Management accountant - Assignment ExampleThey atomic number 18 only recognized as expenses when they atomic number 18 sold and at that time they argon recognized as cost of goods sold (Drury, 2008). According to the outside(a) Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) it is essential that a firm uses engrossment be to record the value of inventory in the books of accounts (Accounting Tools, 2014). The main components of this type of cost methods areIt is however affirmable to allocate expenses with the help of activity based costing method. But it is considered to be a more enlarge method and therefore more time consuming and costly. The be allocated under the method of overhead absorption costing method may be over absorbed or under absorbed. The costs are allocated on the basis of rates of overhead. It may be seen that the actual expenses incurred and that which is recorded power not be the same. Also there might be costs that cannot be directly be traced to the proceedss as they might not fall under the overheads. Under such circumstances direct costing is more cooperative as it does not require any allocation. Absorption costing is also referred to as full costing or full absorption (Izhar and Hontoir, 2001).Overhead Costs- The next step is to calculate the over head costs of each department. This is done by multiplying overhead rate with the hours per unit. The obtained figure is again multiplied with the units produced of each product (Lucey, 2007).Rates per unit calculation- Under ABC costing, the first step is to calculate the rate per activity. As per the prone problem, it is known that there are five activities. The total units in terms of each activity are known. The total cost is also known. Therefore it is possible to calculate the rate per unit. They are calculated by dividing cost pools by cost drivers given in the problem (Jain and Khan, 2006)Total Cost for each activity- immediatel y that the rates are known