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Essay / Research Paper Abstract
This 4 page paper looks at two different cases provided by the student concerning different types of costing. The first case deals with absorption costing, with the potential use of this method assessed for the case of a farm. The second part of the paper looks at the process of activity based costing and assesses the advantages and disadvantages of this type of process. The bibliography cites 5 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEcostq2.rtf
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Unformatted sample text from the term paper:
which is being suggested makes use of cost and profit centers. The use of cost centers is seen in the process of absorption costing. This is a process where
the operations of the farm divided down into different areas, and the costs which are incurred as result of production are then divided and allocated into those different cost or
service centers. The cost of the tasks are undertaken by the employees are divided into four different functions; production crops, the harvesting
crops, processing of the corn and soybean harvesting. The costs of the employees are broken down and allocated based on the amount of time but the employee spends on each
task. Other sources of costs are also broken down in a similar way, and a suitable way of allocating the costs to is determined and then applied (Chadwick, 2004).
Absorption costing, which also known as full or total costing, has a number of advantages. The idea is to make sure that each
item which is produced will result in having a fair share of all the fixed overhead costs allocated to his cost of production, so that all of the overhead costs
are recovered. In order to undertake absorption costing there is a necessity to forecast the overheads that will be incurred for the
next accounting period, this may be the result of a careful calculation, alternatively it may be an estimation if a calculation is not viable (Chadwick, 2004). The next consideration is
to determine the best way of the costs to be broken down. For example, the labor in the case does he sees the cost of labor broken down by the
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