I have to prepare a report for management that explains some of the advanced cost accounting concepts that I learned in the course. The organization I am addressing is ACME Manufacturing. ACME is a new entrant that will start operations in Mexico during the next year with a plant that will manufacture electric cars. The product is expected to be sold in the NAFTA trade zone and the company expects to expand to other locations within a couple of years.
1. Select Job Order Costing, Process Costing, or a hybrid method as a recommendation for ACME Manufacturing. Justify the choice you made.
2. Select the accounting method ACME should implement for managing overhead costs. Compare and contrast actual costing, normal costing and standard costing. Describe the system you have selected and explain why you think it would be the best choice for ACME.
3. Construct a scenario in which ACME may want to install Activity Based Costing (ABC). Evaluate the advantages and disadvantages of using an ABC system.
4. Include a recommendation on whether the company should build inventory for resale or whether an activity based management system should be used to pull products through the production system.