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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Activity-Based Reporting and Capacity
Refer to Exercise 10-34.
Required
a. Prepare a traditional income statement like the one in Exhibit 10.10.
b. Prepare an activity-based income statement like the one in Exhibit 10.11.
c. Prepare a short report to Gunnison Supply’s managers describing how the activity-based income statement prepared in requirement (b) can help them manage costs.
Verified
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Cost accounting system
This is a system designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.
Income statement
Income statement indicates the profitability of the company. It shows the sales, cost of goods sold gross margin, any other fees earned like delivery fees, delivery cost, operating costs and operating profit. Activity based income statement also shows the resources used, resources supplied and unused resources capacity also for each element of delivery cost.
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