Global Electronics Inc.

Assuming that the company’s goal is to maximize profits, the current cost system is not an appropriate tool for strategic planning. The ambiguity of the overhead costs per product makes it difficult to accurately analyze the cause and effect relationships of changes and/or improvements to specific product line.

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.

Develop and diagram an activity based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?

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

Activity-based costing (ABC) methodology is an instrument designed to provide accountants and managers with valuable costing information that will allow them to make sound strategic decisions. It is used as a secondary methodology rather than a replacement for the company’s primarily costing system. The ABC methodology identifies activities in an organization and for each activity it assigns a cost. The cost reflects the actual resource consumption by each activity that has been identified.

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.

3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities:

Q3. How were the limitations of the existing cost system overcome by the ABC Cost System? What are the implications of the ABC system?

Star River Electronics Ltd. is a large manufacturer and supplier of CD-ROMS. It was founded as a joint venture between New Era Partners and Starlight Electronics Ltd. It has enjoyed a great deal of success in the past decade, due in large part to their excellent reputation.

with a number of strategic issues facing a capital-intensive, mature industry. Their product costing system was

Q3. How were the limitations of the existing cost system overcome by the ABC Cost System? What are the implications of the ABC system?

With this system each customer’s order cost the same amount to complete causing orders with high profit limits to subsidized orders with low profit limits making it difficult for Super Bakery to know the true cost for an order. The company changed to the activity-based costing (ABC) system allowing the managers the ability to recognize the cost and profit margins for each sale. The ABC system associates the costs with the activities allowing managers the opportunity to access a system that allocates overhead costs that uses multiple bases. Costs can be traced back to each individual’s account regardless of the product provider letting managers know which products are profitable and which ones are not. The traditional costing system allocates cost to departments or jobs instead of overhead cost pools. The traditional costing system makes it difficult to know which activity or product is making a profit.

General electric is an American company which was founded in 1982. Thomas Edison, Charles Coffin, Elihu Thomson, Edwin Houston were the key people of this organisation its headquarters are in Fairfield and Connecticut. It serves customers in more than 100 countries This Company basically operates power, water, oil and gas, energy and aviation. In 2011 GE was the 26th largest company then in 2012 it become the 4th largest firm. But the most proud moment of GE was when in 1932 the employee of GE was awarded two times with Nobel Prize

Understanding a target market’s needs and desires can assist companies with tailoring their offerings in the name of profit. Texas Instruments (TI) had been business since 1930. During this time they have reinvented their offerings to remain a viable business entity throughout the decades. Their ability to stay ahead of the change curve has translated into a current market cap value of approximately $47 billion ("Yahoo finance," 2014). Whether it is calculators, semiconductors, software or education materials TI has been able to continually transformed itself using a strategy predicated on “risk taking and innovation” ("Texas instruments," 2014).