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Group 2 : E1-1

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by

Natasha Oraha

on 23 January 2014

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Transcript of Group 2 : E1-1

Group 2 : Ethics Challenge (pg. 152)
You and your friends go to a restaurant as a group.

At the end of the meal, the issue arises of how the bill for the group should be shared. One alternative is to figure out the cost of what each individual consumed and divide up the bill accordingly. Another alternative is to split the bill equally among the individuals.
Required:
Which system for dividing the bill is more equitable? Which system is easier to use? How does this issue relate to the material covered in this chapter?
Alternative 2
Divide bill according to what each individual consumed.
ABC: Activity-Based Costing
Pros:
Cons:
More accurate billing per individual
Takes more time
Sometimes it's hard to trace back one cost to one individual. Shared dish?
How it relates to the chapter:
"...in activity-based costing a company uses a number of allocation bases for assigning costs to products. Each allocation base in an activity-based costing system represents a major activity that causes overhead costs" (page 119-120). See pg. 120 for examples.
Alternative 1
Divide bill equally among all individuals.
Traditional Costing Methods
Pros:
Takes less time
Cons:
Somebody could be paying for another individual's food!
How it relates to the chapter:
"...a single overhead rate, called a plant-wide overhead rate, was used throughout an entire factory. This simple approach to overhead assignment can result in distorted unit production costs..." (page 118).
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