Essay Sample on The Activity-Based Costing: Key to Accurate Cost Allocation in Manufacturing

Introduction

The Activity-Based Costing (ABC) is widely used in the field of accounting to refer to the method applied primarily in estimating the overhead costs regarding the production costs and then allocating these costs to products using the cost-driver rates (Jim, 2013). Therefore, the ABC cost data play a paramount role in the manufacturing companies, whereby it results in excellent cost allocation. This is, however, significantly achieved by allocating costs to various activities to identify how each task uses the resources for cost control (Jim, 2013). Besides, it ensures excellent pricing because by comprehensively understanding all the cost applied in manufacturing, companies can efficiently define the selling prices (Jim, 2013). The ABC cost data also allows the manufacturing companies to practice reasonable inventory control by dividing the inventory into various distinct classifications and giving priorities on the inventories with the highest value.

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The Standard from IMA Statement of Ethical Professional Product Violated by Priscilla

On specific ethical standard from the IMA statement that Priscilla violated in this particular scenario was integrity (Tracie, Miller-Nobles, Brenda & Ella, 2018). Once the new production analyst, Cabello found out that Priscilla was misusing the company's resources to enhance her assets, the primary standard of integrity was dishonored. For instance, by using the tools and materials from the company to work on her plane are some of the actions that do not depict ethical professional practice.

Would Priscilla be Able to do this if Traditional Costing Methods had been used?

Ideally, traditional costing methods are more comfortable and simpler to apply, although they are not as accurate as compared to the ABC systems. They can also lead to both over-costing and under-costing of the products (Tracie, Miller-Nobles, Brenda & Ella, 2018). Thus Priscilla would still have carried out the misconduct even though the company was under the traditional costing system. The only difference is that in traditional costing system identifying where the problem was or the misconduct would be somewhat difficult.

Recommendation

The first recommendation would be for Cabello to report his findings to the immediate supervisor as this would ensure that the right individuals are conscious of and can substantially control the situation.

References

Jim, W. (2013). "Activity-based Costing vs. Traditional costing" The Strategic CFO.com Retrieved from https://strategiccfo.com/activity-based-costing-abc-vs-traditional-costing/

Tracie, L., Miller-Nobles, M. A. T. T. I. S. O. N., Brenda, L. M., & Ella, M. (2018). Horngren's Financial & Managerial Accounting, the Financial Chapters Plus Myaccountinglab with... Pearson Etext, Global Edition. PEARSON EDUCATION Limited.