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Greetings Assignment

726 words - 3 pages

5/4/2015
5/4/2015
Misty Mitchell, Derek Cowan, and Katherine Miles
Accounting 203 Jim Stanley
Misty Mitchell, Derek Cowan, and Katherine Miles
Accounting 203 Jim Stanley
Greetings Inc.

Greetings Inc.

1. Wall Décor should use the ABC (Activity-Based Costing) system because there is some significant difference between their framed and unframed products. Each of the four activities Wall Décor produces and sells have different profits and costing. With the Activity-Based Costing they can charge different prices and show how each activity is doing financially.
2. Compute the activity overhead rates for each activity:
Activity 1) 91,700/131,000 = .70
Activity 2) ...view middle of the document...

5. Explain why the overhead cost related to website optimization was first divided into two categories (unframed and framed prints) and then allocated based on the number of prints.
The Web Optimization activity was divided after it was made clear that time spent managing the basic pictures (unframed) was far lower in terms of web optimization that the time spent managing the over 100 different variations of the frames alone for the framed images on the web site. Therefor to better allocate the correct overhead to the correct driver the Web Optimization activity was divided into two parts.
6. When allocating the cost of Website Optimization, the decision was made to initially allocate the cost across two categories (unframed and framed prints) rather than three categories (unframed, steel-framed and wood-framed prints with matting). Discuss the pros and cons of splitting the cost between two categories rather than three.
The pros of making the split of web optimization in two parts are: Ease of use (easier to break down), more drastic separation (amount of labor). The cons of only a two-way split in the web optimization activity are: Less...

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