ABC Analysis
Review the Decision Case 1 (Harris Systems) located on page 942-943 in you textbook. Answer the four case questions in the Requirements section of the case. In addition, address the following in one to two paragraphs:

Compare and contrast ABC costing and traditional costing methods, giving examples.
In the assigned case, which system provides a more accurate picture of the cost incurred to produce the jobs?
Provide examples of manufacturers in your geographic area and explain which system would be best for them.

ABC Analysis
1. Product cost per unit for each job
Job A Job B
Overhead cost 1760 1320
Direct materials cost 2200 3000
Direct labor cost 1600 1200
Product cost per unit 5560 5520
2. Under the ABC costing system, the product cost per unit for each job will be obtained as follows;
Grids for the overheads Job A Job B Job A Job B
Functions Rate x Usage Rate x Usage
Material Handling 0.85 x 15,000 0.85 x 2,000 $12,750 $ 1,700
Machine setup 500 x 6 500 x 4 3,000 2000
Assembling 80 x 1,500 80 x 200 120,000 16,000
Shipping 1,500 x 1 1,500 x 1 1,500 1,500
Total Overhead 137,250 19,400
Job A Job B
The overhead rate = 137,250/100= $1,372.50 =19,400 /10= $1940
The product cost per unit will be as follows
Job A Job B
Overhead cost $1372.50 $1940
Direct materials cost 2200 3000
Direct labor cost 1600 1200
Product cost per unit 5,172.50 6,140
3. ABC costing method is the most accurate costing system in assigning the costs to the different activities involved, as it integrates and includes all activities involved in the production process.
a) Based on the original system, the company will outsource both jobs from the dependable company to lower the costs of production.
b) In terms of the ABC system, Harris Company will only outsource job B, since it can product job A at lower costs than $5400 per unit of outsourcing.
I think the outsourcing of job B only will help in maximizing the productions at lower costs and thus, yielding higher margins. Since, the outsourcing of job will be save the company numerous resources as well as still produce job A at lower costs than the outsourcing costs.
ABC is usually more accurate, as it considers different factors. In contrast, traditional costing is easier, but it is not accurate as it relies on assigning average overhead amounts. An example of the costing methods could be indicated with the living cost in a room with roommates (Kaplan & Anderson, 2013). The roommates could share the major costs such as rent and utilities and thus illustrating traditional costing. In contrast, the roommates could decide which elements to use for assigning costs and thus, illustrating activity based costing. In spite of all, both methods assists in allocating and assessing overhead costs, which are charged to the job processes to determine the product costs.
In the assigned case, ABC systems helps in providing a more accurate picture of the costs incurred during the production of the different jobs. The system identifies all the functions within the production processes and their assigned costs, which influence the costs, assigned to the jobs (Datar et al., 2013). It will provide accurate information towards the costs incurred to the different jobs.
Some of examples of manufacturers in my areas include automobile manufacturers such as Ford Inc. the automobile manufacturers could rely on the ABC systems to account for all its costs associated with the production process (Rumble, 2012). Therefore, the ABC costing model is appropriate in understanding the nature and implications of the various costs elements.

Datar, S. M., Rajan, M. V., Wynder, M., Maguire, W., & Tan, R. (2013). Cost accounting: a managerial emphasis. London, UK: Pearson Higher Education.
Kaplan, R., & Anderson, S. R. (2013). Time-driven activity-based costing: a simpler and more powerful path to higher profits. Boston, MA: Harvard business press.
Rumble, G. (2012). The costs and economics of open and distance learning. London, UK: Routledge.