Case study on a large company Today, more and more organizations prefer activity-based costing (ABC) to function-based costing. ABC takes into account the smallest details regarding the activities and factors that contribute to the final cost. ABC is based on an activity hierarchy in which different activities that influence cost accumulation are grouped into different categories. Such a costing method improves cost measurement by organizing information about activities (Thompson, 2003). The group will complete requirements (a) through (e) found at the end of the case. They will then find three sources on the Internet that compare and contrast activity-based costing systems and function-based costing systems. And, to demonstrate this, the group will discuss in which scenarios each system could lead to better decision making at Huge Company. a.) Calculate the costs of each job using the current costing system. Total labor cost $90,000,000 Total labor hours per year $2,000 Total number of employees 1,000 Average hourly cost per person – 90,000,000/ (2,000 X 1,000) = $45.00/hour/person Job 1: $45 X 22.50 hours of labor = $1,000.30 Job 2: $45 X 160.00 hours of labor = $7,200 Job 3: $45 = $5,400 Job 5: $45 Activity-based costing improves cost product accuracy and addresses internal operational concerns. Provides the actual costs associated with each product produced by the organization. (Dekker, 2003). Cost drivers are used as a replacement for general ledger accounting which was heavily labor based. The ABC system involves the integration of……half of the paper……tems. Hilton: Cost ManagementStrategies for Business Decisions, Second Edition, McGraw-Hill, 2002.Thompson, (2003) Activity-Based Costing, accessed October 29, 2004 from http://www.bnet.com/abstract.aspx?scid=1770&docid -82061Cross, L. (2003) Advances in ABC costing. Graphic Arts Monthly, Retrieved October 30, 2004 from http://www.gammag.com/Current/index2(6-30-03).htmlTarr, J.D., (2004) Activity Based Management-Merging Process and Measurement. ACA Group, Retrieved October 30, 2004, from http://www.theacagroup.com/activitybasedmanagement.htmDekker,L. (2003) Activity Based Costing: A Concept Whose Time Has Come. Retrieved October 30, 2004, from http://eee.bnet.com/abstract.aspx