Your friend has been offered a job in the accounting department of the company that you were allocated in Week 1 of this unit this term. Your friend is particularly interested in your knowledge of Activity-Based Costing (ABC). Your friend asks you to prepare detailed answers to the following questions. Refer to the most recent annual report of your company, in your answers to sections (b) and (c) below.

Required:

aExplain to your friend, using your own words, how an ABC system works for product costing. You can Create your own diagram or flow-chart to assist in your explanation, if you wish.

bFor your company, identify two activities that could be defined for use in an ABC system. Explain why you have chosen these two activities.

cBased on your answer to (b) above, provide an example of how each of the two activities could be used to assign costs to the company's products, customers and/or other cost objects. Provide a screen shot of the product, customer and/or other cost object from your company's annual report, to support your answer.