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Loft and Lie Finished Club For this example, a shafted club has the cost of the head and shaft as well as some labor and some overhead
Loft and Lie
Finished Club
For this example, a shafted club has the cost of the head and shaft as well as some labor and some overhead. A finished club would be worth more since it has more labor and overhead. We take our overhead costs at the end of each year and divide it by the number of clubs produced to get our new overhead rate. Each product is separate (irons, metal woods, putters etc.) so this is easy to do.
please let me know if you agree or disagree
Expert Solution
If there exist multiple number of product ,Activity based costing is better to be used for accurate estimation of cost allocation to the products.
Activity based costing focuses on allocating cost based on activities rather than products and departments.
It uses multiple cost pools and cost drivers rather than traditional method which alllocates overhead based on volume drivers.
There exists a cause and effect relationship between cost and its drivers.
Hence It avoids the problem of under or over allocating cost to some product rather than other and also helps in taking pricing Decisons.
Thus, I do not agree with the idea of allocating overhead based on the output produced rather i agree with the idea of allocating overhead based on activities.
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