OverviewCompanies 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.
o
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.
o
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.
o
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.
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