Preliminary stage cost drivers definition

Accounting Essay2

Glaser Health Products
(The paper is attached below Case 5A)

In this case, management needs assistance in evaluating and classifying costs identified within Glaser Health Products in order to implement an activity-based costing system. Please address Questions 1 through 6 at the end of the case. Based on the case questions, you are required to provide a two to four double-spaced written report providing management with the necessary guidance in implementing an activity-based costing system. The written report should be properly formatted according to APA guidelines and demonstrate research and critical thinking skills. Explanations and recommendations should be supported by at least 3 scholarly sources from the Ashford Library or other external sources, excluding the textbook.

For Questions 1 through 3, create a chart to classify and identify a cost driver for each of the costs provided in the text. The chart should be included as an appendix to the written report. Explanations of the classifications and identifications within the chart should be included within the written report, supported by references to the appendix.

Questions 4 through 6 should be addressed in fully developed explanations/instructions as part of your written report. The written analysis should be supported by at least three scholarly sources, excluding the textbook.

Week 3 Written Assignment should:

Demonstrate graduate level work including appropriate research and critical thinking skills.
Be presented as a written analysis (not a question/answer format).
Incorporate case questions into the overall analysis.
Follow APA formatting guidelines including title page, reference page and in-text citations.
Consists of two to four double-spaced pages of content.
Provide at least three scholarly sources, excluding the textbook.

CASE 5A -- GLASER HEALTH PRODUCTS

Glaser Health Products of Ranier Falls, Georgia, is organized functionally into three divisions: Operations,

Sales, and Administrative. Purchasing, receiving, materials and production control, manufacturing, factory

personnel, inventory stores, and shipping activities are under the control of the vice-president for

operations, George Gottlieb. Advertising, market research, and sales are the responsibility of the vice-

president for sales, Jake Bogan. Accounting, budgeting, the firm's computer center, and general office

management are delegated to the corporate controller (Administrative), Charlie Kaplan. The following

cost categories are found in the company as a whole:

(a) Depreciation on factory equipment.

(b) Depreciation on office equipment.

(c) Depreciation on factory building.

(d) Advertising manager's salary.

(e) Assembly foreman's salary.

(f) Salespersons' salaries.

(g) Salespersons' travel expenses.

(h) Supplies for the Machining Department.

(i) Advertising supplies used.

(j) Electricity for the Assembly Department.

(k) Lost materials (scrap) in a Machining Department.

(l) Direct labor in the Assembly Department.

(m) Supplies for the sales office.

(n) Sales commissions.

(o) Packing supplies.

(p) Cost of hiring new employees.

(q) Payroll fringe benefits for workers in the Shipping Department.

(r) Supplies for Production Scheduling.

(s) Cost of repairing parts improperly manufactured in the Machining Department.

(t) Paint for the Assembly Department.

(u) Heat, light, and power for the factory.

(v) Leasing of computer equipment for the Accounting Department.

Required:

1. Identify each of the costs with the appropriate division: Operations, Sales, Administrative.

2. Identify each of the costs with one of the following:

(a) Unit-level activities. (c) Product-level activities.

(b) Batch-level activities. (d) Facility-level activities.

Organize these classifications by division: Operations, Sales, Administrative.

3. Specify an appropriate cost driver for tracing costs associated with the various levels of activities to

the next cost objective or products, whichever is appropriate.

4. Glaser Health Products is interested in using activity-based costing to identify as many costs as

possible with the products. These costs will be used for planning and control decisions rather than for

inventory valuation. The controller decided that all operation costs will be related to products but only

those sales and administrative costs that are classified as unit-level, batch-level, or product-level costs

should be related to products. Using preliminary stage cost drivers, explain how individual items of

costs will be traced to activity groupings.

5. Using primary stage cost drivers, show how the costs should be related to products.

6. Explain why it is necessary to use preliminary stage and primary stage cost drivers.