... costing model that includes all manufacturing costs. For example, one is the direct material, those materials that become an integral part of a finished product and can be conveniently traced into it. Another is direct labor, those company labor costs that can be easily traced to individual units of product which are all kinds of cakes. The other is both variable and fixed manufacturing overheads, something like rent, insurance, power and utilities of the Santa Cakes Pty Ltd. Currently, the company's new cost structure is more complex than before, the traditional costing system is no longer suitable for current complicated conditions. So it is the time to adopt new costing system which is the Activity Based Costing system. This method computes the overall product cost taking into account the cost involved in the intermediate activities leading to delivery of the final product. ABC refines costing systems by focusing on individual ...

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