Abc : An Effective Tool For Costing Products For Sellers Essay

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.

Activity-based costing can be defined as the managers allocate costs depending on the quantity of resources a product or service consumed in the manufacture of goods and services. The activity based

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.

Activity-based costing is a system of accounting that puts emphases on activities performed to produce products or services (Schneider, 2012). In this costing system every activity is assigned a cost (Schneider, 2012). The goal of activity-based costing is not to allot common costs to products but to measure and then price out all the resources used for activities that sustain the production and delivery of products and services to customers (Mazumder, 2007). Activity-based costing is a cost system that is useful in business because of the fact that it does account for the cost of the products, resources used to produce the product and delivery of the product.

Glaser Health Products of Ranier Falls, Georgia needs assistance in evaluating and classifying costs in order to implement an activity-based costing system. As stated in the case, these costs will be used for planning and control decisions rather than inventory valuation. The activity-based costing system will provide better allocation of Glaser’s overhead costs rather than a system to look at the cost drivers or the activities that their overhead costs comprise. Glaser’s general structure of an activity-based costing model should consist of cost

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

The first item at hand is what kind of detail does activity based costing provide that is different than traditional costing?

This paper provides a brief presentation of Activity-Based Costing methodology, how is used as well as its short comings.

An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx,

An activity-based costing system is meant to perform the role of operational control as well as to provide the basis for costing inventory for financial reporting.

Activity-based-costing (ABC) system find activities as the drive for each cost, calculate the average cost per driver’s activity, and times budgeted activities for budgeted cost. It is worth mentioning that ABC system is not used to find problems in cost records, or predict future cost based on that.

Nowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The

In contrast to traditional cost accounting systems, ABC systems first accumulate overheads for each organisational activity. They then assign the costs of these activities to products, services or customers (referred to as cost objects) causing that activity. The initial activity analysis is clearly the most difficult aspect of ABC. Activity analysis is the process of identifying appropriate output measures of activities and resources (cost drivers) and their effects on the costs of making a product or providing a service. ABC systems have the flexibility to provide special

C. T. Horngren, A. Bhimani, S. M. Datar, G. Foster (2005), 'Activity-Based Costing', Management and Cost Accounting (Prentice Hall Europe), 345-363

ABC refers to cost attribution to cost units on the basis of benefit received from indirect activities e.g. material ordering, material handling, machine setups, quality assuring, customer support services etc. For each such activity, it is necessary to identify a cost driver that causes incurrence of cost relating to that activity. For example, hours spent on testing for a quality assurance activity may be used as application base of cost driver for this activity.