Traditional and Activity-Based Costing - Sewing Easy Ltd

Question :

This unit is based on Sewing Easy Ltd which is dealing in manufacturing sewing machines in the recent year they earned high profit thus they planned to expand business activity.

• Determine the cost per unit of basic and advance models under current traditional costing system.
• Analyze basic and advance models under Activity-based costing system.
• Explain major reason in the context of overseas buyers for buying advanced model.
• Explain reasons on the basis of the same overheads and recommending ways for dealing with its fluctuations.
• What is the Merit and demerits of activity-based costing system?

INTRODUCTION

Management accounting can be referred as process of preparing accounts and reports which will be helping manager for finding financials which are accurate and even the information which will be useful for short term decision making such as statistical information. On the perspective of business unit, better planning has been ensured by management accounting and proper control over the organization. This report is totally based on case scenario of Sewing easy ltd whose business model can be described as basic and advanced especially in manufacturing context. The main objective of organization is to enhance the base of customer and profit level should be maximised as each business units has a desire to explore there operations at global level. This report is giving very deep insight about two methods i.e. traditional based costing and activity-based costing. The report will be elaborating there merits as well as demerits.