Answer in 500 WORDS Refer to financial statements of Apple (Apple.com) and Googl
ID: 2550843 • Letter: A
Question
Answer in 500 WORDS
Refer to financial statements of Apple (Apple.com) and Google (Google.com) to answer the following.
1. Identify at least two activities at Apple and at Google that cause costs to be incurred. Do you believe these companies should be concerned about controlling costs of the activities you identified? Explain.
2. Would you classify Apple and Google as service, merchandising, or manufacturing companies? Explain.
3. Is activity-based costing useful for companies such as Apple and Google? Explain.
Explanation / Answer
1.These are the two major activities that causes cost to be incurred:
• Designing
• Inspecting
Both the companies should concern about the controlling the costs of above activities. As cost incurred for the above activities is considered as indirect costs. It will be beneficial for the business in controlling the indirect costs.Direct costs are expenses directly linked to providing a specific product or service. Business owners sometimes significantly reduce those costs by using less expensive materials, equipment or labor. Nonetheless, an owner needs to weigh the risks associated with making such changes. The changes could result in producing inferior products or services that compromise people's safety and decrease sales. In such cases, lost sales could cost owners more than they save by reducing direct costs.
Therfore,It is very important to reduce the indirect cost as much as possible because reducing direct cost might lead to change in the quality or other aspects of the end product as mentioned above.
2.Both the companies are manufacturing companies. They produce different type of motor vehicles.
3.Activity based costing is very much useful for manufacturing companies. As in a manufacturing company more number of activities are involved when compared to service and merchandising type of businesses. In activity based costing, cost assigned to each activity is assigned to each product on the basis of activity consumed by each product.