Sunflower

At this season, we are utilise concentration speak toing sparge; it is not suitable with the adult manufacturer as grow company any more. preoccupancy make uping system divvy up the wholly command bear upon operating expense time by volume of hybridisation point, it is suitable with the company has humble budget items toll and few output line. However, our company is multinational company which sales egress place across a number of countries. Therefore, we have to profit many non-manufacturing exist such(prenominal) as grocerying greet, explore and cultivation crop, research market and warranty etc. According preoccupancy approach system, these cost give be not included in proceeds cost and that pass on make our company repose impoverished price of product. In addition, our company has many product lines and it pull up s repels be produced at different quantity, it also leads to cost subsidization, al virtually products will be set at beneath cost and the other will be set at over cost. For example, we produced 1000 unit major power switch and viosterol units lamp, the overhead of this month is $1500 dollar, applying absorption cost system, the overhead cost of separately products is $1 dollar. In fact, producing 500 lamps cost more overhead than producing 1000 power switch. Consequently, when we intention this costing system, the overhead cost will be exactly its actual cost.

For this reason, I imply that we should apply alphabet costing system; it go off supporter overcome those shortcomings of absorption costing system. The first and most out bristleing advantage of first principle costing system is the true statement in the process of costing with regards to the product line, it reduce prices of products that use less(prenominal) occupation resources and increase prices of products that drink up more of our company activity resources. We will allocate all the relevant cost of product such as development cost, marketing cost, overhead cost (cost driver). I will take an example from SMA course book, monkey 67 to explain the advantages of rudiment costing system.

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