Management Accounting & Activity Based Costing Essay

centering Accounting & Activity Based Costing - Essay Exampleproduction process encompasses various activities much(prenominal) as operation of apparatuss, maintaining the machinery, as well as supervising the production process. Operators ope calculate the machines maintenance chemical mechanism perform the machine set ups and maintain machines when boundary line and the supervisors provide supervision for the maintenance mechanics and machine operators. Other activities include building, administration and sales.The resources used include energy for the set-up and molding process by the molding machines. Machines consume 6.3KW of energy on an hourly basis. Also, other consumable shop supplies like lubricants and hoses form the study resources within the company.A monetary value driver refers to characteristics of events or activities which results in business incurring costs. Activity base costing have the products consuming activities and the activities consume the resource s (Kallunki& Hanna 2008, p. 62-79). In the case study above, the production process has the telephone twist of orders and number of set up machines as the cost drivers.The Cost drivers for machine operation include the number of the operators and machines available. Machine maintenance cost drivers include the number of machines to be maintained and the number of technicians. The supervision cost drivers include the number of supervisors and number of people to supervise. Cost drivers for the building include insurance and rent costs. soma of machine hour in production may be used in calculating the rate of machine hour relating to repair, depreciation and maintenance processes. Also, the production process will have the number of inspections as the cost drivers.In making of the product, inspection for quality evaluation requires the appointment of experts who consume money in terms of salary, travel, electricity, as well as the depreciation of the equipment. The overheads may be calculated based on the number of tests. Each batch requires 4 tests, and suppose the available batches are 200,