You are a staff accountant working for a manufacturing entity. Because of the uniqueness of theproducts manufactured, your organization has been using a job osting system versus a process

costinting system.

Under job costing, costs are allocated and tracked for each job or order. For

each job, direct materials and direct labor can be easily tracked and attached to the cost of the

job. However, overhead costs have traditionally been allocated based on a pred

etermined

overhead rate calculated at the beginning of each period and tied to the number of direct labor

hours worked for each job. Because of the need to track these costs multiple times throughout

the year, the company uses a normal costing system vers

us an actual costing system. Under

normal costing, each job is assigned the actual costs for both direct material and direct labor but

overhead is applied on an estimated basis. At the end of the period, a review is conducted of

applied to actual overhea

d costs with any variance, usually immaterial, adjusted to the balance of

cost of goods sold.

Your supervisor, the Chief Financial Officer, has asked you to conduct research on a different

way to assign the cost of overhead. In particular, the CFO has rea

d in various accounting

journals that some companies resort to Activity Based Costing (ABC).

He would like for you to

prepare a presentation on what Activity Based Costing (ABC) is and whether it is something that

should be employed by your organization.