1. Assess the implementation of the time-driven ABC system at Kemps. What do you like about it? What are you less happy with, and would have done differently?
One of the best aspects of the way the time-driven ABC system was put into place at Kemps was how efficiently and accurately management determined the main issues with the current cost system and responded with appropriate and relevant solutions. For example, one of the greatest problems the company was facing was that many of its operating costs were spread out equally over a customer base that was growing more diverse and demanding more personalized and varied service, effectively cutting or potentially eliminating entirely Kemps’ profit margins for a product. Therefore,
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Second, costs could be reduced by consolidating deliveries so as to eliminate the additional cost of transporting less-than-full truck loads. Additionally, packaging could be standardized so as to reduce changeover times on the production floor. Should none of these options (or any appropriate combination of them) be acceptable, Kemps may need to consider discontinuing the relationship with the customer.
b. National branded chain of retail food outlets that was soliciting bids from dairy suppliers
As previously mentioned, the use of activity-based costing gives Kemps an advantage when competing for customers in an ever more competitive and growing market. However, the ability to succinctly distinguish how many small changes, when taken together, can have a large impact on cost savings (and therefore profit), is necessary in order to convince customers who may not be familiar with the many benefits of ABC. Mainly, management would want to demonstrate how the cost savings that they enjoy are ultimately passed on to their customers, perhaps by showing some of the improvements that have been made to their own company as a result of implementation, specifically focusing on advancements that would have a direct impact on the customer’s business.
c. High incidence of returns from convenience store outlets.
There is no doubt that excess returns due to overstocking would be a major
4) Based on your positioning strategy, what brand name and marketing budget allocations would you advise?
The purpose of this report is discussing the case of Wilkerson Company that confronting tough competition in price cutting in pumps which caused to a big drop of pre-tax operating income from 10% to 3%. After observing the existing costing allocation, we found out there is an issue on the existing costing report that the manager could not be able to see the real situation. In light of this, there will be brought to the discussion on the feasibility of using an alternative costing method – Activity based costing (ABC) in the latter paragraphs.
The week four individual paper addresses the implementation of Activity Based Costing (ABC) by Super Bakery, Inc., a virtual corporation founded by Franco Harris. Specifically, management strategies, the reasoning behind an ABC system, and the alternatives of a job order cost system or a process order cost system are assessed for this enterprise.
Under an ABC system, the allocation of costs to products is achieved through at least four analytical steps. Firstly, costs are grouped into activity levels. Secondly, cost drivers are
Under a traditional system, overhead cost is allocated to an activity based on hours or rates for direct labor or machine usage. However, this approach does not clearly indicate how much overhead cost will be needed in order to complete a job through a particular function. ABC methodology is to be used as an alternative to traditional accounting where a business 's overhead costs (indirect costs such as electrical energy consumption for heating or cooling, or indirect cost associated with marketing) are allocated as a proportion of direct costs, to an activity. This approach is unsatisfactory because there can be cases where two activities could absorb the same direct costs
Young Professional magazine was developed for a target audience of recent college graduates who are in their first 10 years in a business/professional career. In its two years of publication the magazine has been fairly successful. Now the publisher is interested in expanding the magazine’s advertising base. Potential advertisers continually ask about the demographics and interests of subscribers to Young Professional. To collect this information the magazine has commissioned a survey to develop a profile of its subscribers. The survey results will be used to help the magazine choose articles of interest and provide advertisers with a profile of subscribers. As a new employee of the magazine, you have been
ABC is a cost method identifying the activities causing the overhead in organizations and then assigning the cost of each activity to products demanding those activities. In the 1980s, General Electric Company came up with ABC as a business improvement technique that can enhance their accounting system (Johnson, 1992; Kee, 1995). Since then, this methodology has been evolved and ubiquitously adopted by many firms, such as HP, Allen Bradley, General motors, and IBM. Some firms embraced ABC along with plants modernization in USA for dropping costs and boosting quality (Blocher, Chen, & Lin, 1999).
This case study investigated the implementation of activity-based costing (ABC) at Super Fast Engineering Co. Ltd (Super Fast), a large manufacturing company in China. Super Fast formerly is a state-owned enterprise (SOE), which turned public limited company (PLC) later. In December 2001, when ABC concepts were at a theoretical level in China, the company had piloted ABC implementation in its main production divisions in its subsidiaries. (Liu and Pan, 2007).
the more popular models for collecting and tracing costs is known as activitybased costing (ABC). This article examines how one government acquisition
Activity-based costing reveals that this analysis is faulty. Using activity based costing, we find out how much work goes into the sales for each category. The results are as follows:
When it comes to any business, company, or firm there will always need to be some way or system that they use to see and calculate how they are doing cost wise. Some companies think that production is going because of the system that is being used. But in reality a company can either be undercosting or overcosting their total cost that they should be using for a job that they produce. If a company doesn’t break down everything they will never really know if the system is hurting or benefiting the company. So when it comes to companies that are in a competitive market, Activity-based costing system (ABC system) would be best for the company to use. The ABC system is a costing method that helps identify the activities and then assigns the cost of each activity with resources to all products and services according to the actual consumption. This means that ABC system will give you a more accurate amount of costs that are being used for each activity. This summary report will outline functions when ABC is implemented, pros, cons, and comparing the ABC system other methods to give you a better understanding of how it works and how it can benefit a company.
5-47 ABC and TOC Discuss the similarities and differences between activity-based costing and the theory of constraints, as well as situations in which one approach might be preferable to the other.
The purpose of this memo is to discuss and evaluate our traditional cost based system versus the new activity based or discrete product costing system. I am going to highlight some of the positive aspects of the new system, discuss future scope and improvements along with some deeper analysis into our unprofitable products and customers.
Managerial accounting is a discipline within the accounting community that focuses on providing valuable information to the leaders of their organization. The importance of the community relies on its ability to provide information that is not readily found in traditional financial statements developed in the accounting department for reporting to outside agencies. Activity-based management utilizes information developed using activity-based costing (ABC) to accurately determine product costs. Accurate and detailed information is required for an organization to reliably budget for the upcoming quarter or year. A complete understanding of the significance of activity-based costing and thorough knowledge of budget concepts are critical
Activity-based costing, or ABC, is defined as “a total quality management tool for cost and performance measurement of activities, resources, and cost object” (Narong 12). Activity-based costing allows business to accumulate information and data about operating costs of the company. Three things made this popular in the 1980s. First, it “eliminated the product cross subsidies inherent in cost accounting. Then, it revealed the sources of loss that were responsible for the decline in profitability. Third, it acted as a catalyst for decisions affecting profitability” (Turney 4). Activity-based costing allows firms activities to be identified. After the activities are identified, products are then assigned different indirect costs. Activity-based costing is sometimes referred to as horizontal or cross functional cost view. It provides