You Have Been Hired by a Company That Is Transitioning

question 134

Essay

You have been hired by a company that is transitioning from a traditional method of product costing to an activity-based costing method.You are assigned to a team that has the responsibility of classifying activities as value-added or non-value-added.One of the team members does not understand the purpose of classifying activities.Define valued-added and non-value added costs for your team member and give an example of each and explain how non-value added activities affect product cost

Understand how to calculate the gain or loss on disposal of an asset and its impact on financial statements.

Interpret the effects of different depreciation methods on the financial statements.

Identify the procedure for apportioning the cost of intangible assets and recognition of expenses.

Recognize the factors affecting the carrying value of long-lived assets and the impact of different depreciation methods used.

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Definitions:

Insurance Plan

An insurance plan refers to a contract between an individual and an insurance company, wherein the company agrees to compensate the individual for specified losses, damages, illness, or death in return for payment of a premium.

Medicare Payroll Tax

A tax collected from both employees and employers to fund the Medicare program, which provides health insurance to individuals aged 65 and older and to some younger people with disabilities.

Capital Gains Tax

A tax on the profit realized from the sale of a non-inventory asset that was greater than the purchase price, typically stocks, bonds, precious metals, and property.

Junk Foods

Foods with low nutritional value, typically high in fats, sugars, salt, and calories.