Overview

Companies choose their costing method based on their business activities and processes, as well as the products and services they offer. A company can be a manufacturing, merchandising, or service organization; this also impacts which costing method will be most useful for its purposes. As a part of costing, the company also needs to decide how to classify overhead costs using either traditional or activity-based costing (ABC).

In this written assignment, you will choose a company, consider its business and costing requirements, and recommend a costing system that will work best for the business.

Prompt

Think about a company you know. This could be a current or past employer or a company you admire. Consider its business activities and the type of products and services offered. Based on what you have learned so far, write a short paper that reflects on the different costing methods and speculates on how they might apply to your selected company.

Specifically, you must address the following rubric criteria:

• Company Overview: Identify the company you selected and provide a brief overview of its business.
  • Is it a manufacturing, merchandising, or service organization?
• Costing Methods: Compare the job order and process costing methods, and explain how each of these can be applied to the company.
  • How could the costs differ if one method is chosen over the other?
• Factory Overhead: Outline possible indirect or overhead costs the company may need to account for, and identify the type of costing the company might use for these costs.
  • If the company decides to use activity-based costing (ABC), what are some activity bases (cost drivers) it might use to allocate these costs?
• Recommendation: Based on your analysis, recommend a costing method for the company, and explain why you think this method will work best for the business.