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Advanced Managerial/ Cost Accounting Project:
You are a manager at PopUp Company, who manufactures toaster ovens. Your company produces two types of toaster ovens: basic and deluxe. PopUp Company currently uses a traditional unit-based costing system, however, you feel strongly the company should switch to an activity-based costing system. You believe this change would provide you more accurate costing information, which would allow for better strategic decision making. You need to prepare a number of documents in order to convince the CFO to change the current cost management system used by your company.
Part 1: Write a 2-3 page report, using at least 3 references, comparing the traditional and activity-based cost management systems. Give advantages and disadvantages of each and discuss how these concepts will relate to PopUp Company.
Part 2: Compute the unit cost of both the basic and deluxe toaster using both the unit-based approach, and the activity-based costing approach. Use the data and template provided in this file: Part 2 Writing Project.xls . Also, prepare sample budgeted income statements and balance sheets based on the costing data you calculated. You can make your own assumptions related to the number needed to complete these statements.
Part 3: Prepare a 2-3 page memo addressed to the CFO summarizing your findings, and why you believe the activity-based costing method gives you more useful information to make decisions for the company. Include in the memo at least 4 ratios that you feel highlight your position that activity-based costing is more useful.
Part 4: Prepare a PowerPoint presentation, with recommendations you would make to the CFO based on the information you gathered using activity-based costing.
