The Abc Costing System Is A Technique For Cost Management

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Thesis Statement The ABC costing system is a technique in cost management. Activity Based Costing aims to reduce costs while at the same time enhancing product quality. Managers use ABC to identify how resources uses cost differently and then determine areas which need continuous improvements. When a unit is produced, unit level activity is done. After a whole batch is doe every time, batch level activity is undertaken for the company. For effective production process, we allow facility sustaining activities in the company. Service industries consist of different services which take different levels of resources. The existence of regulation and stiff competition in the service industry do determine the costing system to be used in the…show more content…
Cost drivers cause and effect basis is used in the ABC system. Integration of accounting services for the company is done to promote cost control using the Activity based Costing systems in the company. Successful implementation of Activity Based Costing requires effective analysis and break down of company activities into individual components for easy cost identification. The whole process of implementation requires collection of valuable resources, followed by measurement and then put into new system for implementation. The Company will also outsource services of a professional expert to set up the Activity Based Costing system in the company. The specialist will provide training to the staff on how to use the system. The implementation requires use of software for easy setup and operation in the company. In FedEx with only one profit center, overhead costs are charged against the product. Product line revenue is included in allocating overheads. FedEx Company is not solely driven by the number of customers but processing rate of transactions in the company. The ABC approach of costing will ensure that customers pay for service bills proportionately and not evenly. Cost of services need to be reflected before full implementation of system among the users. For successful implementation of ABC costing system, there is a procedure which needs to be followed. The first step is to divide
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