Activity Based Costing Essay

What are the strategic risks and benefits of outsourcing production of the Temecula plant to contract manufacturers in China?

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.

The question to whether we should buy strictly American made products has been around for a long time many people think it’s a good idea and many think it’s a bad idea. I think that we should buy strictly American made products because if we start making these products our self it could open up more jobs for Americans to fill and it could help to drop the unemployment rate. It has been stated by Roger Simmermaker that “In just the last 10 years the United States has lost out on approximately 2 trillion dollars in cumulative trade deficits with china alone”(Simmermaker 1). That is money that we the Americans could have profited from if we would just make the products ourselves and buy from other

1. Why is outsourcing such an attractive way for firms to tap into foreign markets? What are the risks of foreign outsourcing?

* Aside from maximizing profits, list the key factors that managers should consider when deciding whether or not to outsource offshore. Determine the key factors that you believe to be the most influential. Provide a rationale for your response.

3. The marketing strategy of company is not so convincing because they can extend their product range with good

• Have open and honest communication with vendors concerning what is going good and bad with their products

Another alternative should be to create a plant in Europe so now they don’t have top ay all the taxes they have to pay so they can export their products, in that way they will be able to give better prices to their clients, and they will supposed to have a better service and more quality because they where the pioneers in those products.

In 2002, Timbuk2 began making some of its new products in China. There are some of the company’s long time customers that are worried about the made in America product being sent overseas to China for production. The company states that they have designed new products and accessories. The company is the same as it was (Timbuk2, 2012). They just want to continue giving their customer the best product economically. They are able to do this by have the bulk orders or mass production of bags manufactured in China. The cost of labor and shipment makes it more cost effective for Timbuk2 to offer their product at their prices. Timbuk2 has stated the bags are more complex to build. They do not have the machinery and the man power for them to produce.

Moreover, even though producing in Vietnam would suppose a strong saving in cost in the labor-intensive processes, the risk of mold duplications and counterfeits is high. The imitation of the company’s products would eliminate the differentiation that allows them to charge a much higher price than the local manufacturers (15$ compared to 3$). Also, the company lacks of experience establishing a wholly owned subsidiary in a new country.

However, a sourcing agent in China can solve these problems these problems. Logistical concerns will also raise the costs of dealing in Chinese goods, but a recent study found from PricewaterhouseCoopers in Germany found price savings of up to 50 percent were common when sourcing in China when compared with local sourcing. The same benefits were true even after the logistical costs were added to the price. [3]

3. How does the Best Buy situation in China differ from its situation in Canada?

1a) Activity based costing is a relatively new type of procedure that can be used as an inventory valuation method. The technique was developed to provide more accurate product costs. This improved accuracy is accomplished by tracing costs to products through activities. In other words, costs are traced to activities (activity costing) and then these costs are traced, in a second stage, to the products that use the activities. Another way to express the idea is to say that activities consume resources and products consume activities. Essentially, an attempt is made to treat all costs as variable, recognizing that all costs vary with something, whether it is production volume or some non-production volume related phenomenon. Both

2. Then we need to understand the customers with whom we have been successful and why.

However, TaiSource shows that they want the market too. If they do so in the near future, USTech will be in a crisis. To avoid the potential threat, US Tech should consider cooperating with a Chinese supplier as an alternative. Another aspect is about Chinese policy, it’s complex, changeable and kind of lean the balance to domestic enterprises. Although TaiSource currently hold the mainland resources and relationships, to have USTech’s own Chinese suppliers could better ease the burden of policy issues and polices to the business if USTech want to explore and expand Chinese market.