Costing Method
Week 6 Assignment – Selecting a Costing Method
Introduction
The selection of a cost accounting method is a crucial step in managing company finances. The
business type often dictates this choice. In this assignment you consider three methods of cost
accounting and evaluate which is best for the company described.
Scenario
Imagine that the CIO of Cool Air Inc., a ceiling fan company where you have recently been hired
as an accountant, has asked you to recommend and justify an appropriate cost accounting system.
This is an important opportunity for you. You recognize that the CIO knows the best method but
wants to test your understanding of cost accounting and how you articulate your ideas and
positions.
Company Background
There are several specific steps to assembling a ceiling fan (this company produces several
models) that require machinery, labor, and support from multiple departments. Activities
include:
Components:
o Blades.
o Motor.
o Remote control.
o Fan housing.
o Power switch.
Departments include:
o Production scheduling.
o Materials receiving.
o Research and development.
o Machine maintenance.
o Product design.
o Parts administration.
o Final product inspection.
o Materials handling.
The CIO identifies three cost accounting method possibilities that you should consider: Activity-
based costing (ABC), job costing, and process costing.
Instructions
Write a 3–4 page recommendation to the CIO justifying the costing system that is most
appropriate for the company described in the scenario above. Your recommendation should do
the following:
Compare the three costing systems in a way that highlights differences in how they would
impact the company’s operations and finances.
Justify your choice of an appropriate costing system for the company that includes an
explanation of the criteria that you considered and clear evidence of why it is chosen over
the other methods.
Identify then analyze the most significant impact of implementing your costing system
choice on company finances.
Analyze the most significant impact of implementing your costing system choice on
company operations.
This course requires the use of Strayer Writing Standards. For assistance and information, please
refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your
professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
Justify the choice of a cost accounting system for
