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Essay / Research Paper Abstract
This 5 page paper assess the importance of the production-cost relationship in a firm and demonstrates how the relationship directly affects the distribution of costs within a firm. This is undertaken by looking at different forms of management accounting; overhead or absorption costing, marginal or variable costing, standard costing and activity based costing (ABC). The bibliography cites 7 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEcstdis.rtf
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Unformatted sample text from the term paper:
few line, for most products there is a necessary relationship between the prediction and the cost. If the production costs more than can be gained for the finished product, then
the goods are not worth creating, unless they support other sales which are profitable. Therefore, to ensure a company remains profitable the costs need to be determined before production
is undertaken, and then monitored as the production process continues. There are several choices in how costing may be carried out, each relating slightly differently with the production process. The
four main methods are overhead absorption costing, marginal or variable costing, standard costing and activity based costing (ABC). Overhead or absorption costing is also known as total or full costing,
has the objective of ensuring that each item produced, cost centre used and process all will bear a fair share of the incurred overheads of the business. The main aim
of using this method is to ensure that the actual overhead costs are recovered, which is why we see the common use of the phrase overhead recovery as synonymous with
the term overhead absorption (Chadwick, 1997). The first stage in absorption cost has to be the determination of the overheads in advance of
the period we are budgeting for. Once we have the actual rates needs then we will be in a position where we can start to break the costs down into
departments or products. In looking at this from the absorption side we can see the term implies the reality of this method; absorbing the cost throughout the production as time
goes by. We can break the process of absorption costing down into five steps; budgeting for the overheads, allocating the overheads, sharing service department costs, the calculation of the overhead
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