Since the Coca-Cola Company is the world’s largest, leading manufacturer and distributor of soft drinks, Coca-Cola’s cost system, structure, and strategy all work together to create a globally successful brand. Coca-Cola’s cost structure refers to the relative proportions of fixed and variable costs the company incurs. Examples of fixed costs for the company are rent and lease payments for the factories where products are made, salaries for executive workers and insurance on machines used to create the products. Examples of variable costs for the company are raw materials such as plastic for the bottles and metal for the cans, delivery charges on deliveries to grocery stores and restaurants, and utilities for the factories.
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Once the company has a clear understanding of the activities involved in the production process, the company can then determine the costs of each product. The production activities for Coca-Cola include concentrate and syrup manufacturing, blending, and packaging. Activity based costing uses two stages to apply overhead costs to products that have been produced. The first stage identifies significant activities and assigns overhead costs to each activity in proportion to the amount of resources used. Stage two identifies the cost drivers that corresponds with each activity and then allocates the overhead costs to each product line. Many, if not all, of Coca-Cola’s activities in production that produce a cost have a specific cost driver. When a company decides to use activity based costing as a strategy, it requires a thorough examination, analysis and understanding of all company activities. Through the analysis of cost drivers, Coca-Cola has been able to have a better understanding of the correlation between the costs they have incurred and the activities that cause the incurred costs. Having activities attached to cost drivers allows for a more accurate result than spreading costs across products, like in process costing.
Coca-Cola was one of the first companies that implemented activity based costing and they have made essential impacts on the ability to track and control expenses at a very specific level. This is just another example of how the Coca-Cola Company has had an impact on the foundation for the beverage
Once the company has a clear understanding of the activities involved in the production process, the company can then determine the costs of each product. The production activities for Coca-Cola include concentrate and syrup manufacturing, blending, and packaging. Activity based costing uses two stages to apply overhead costs to products that have been produced. The first stage identifies significant activities and assigns overhead costs to each activity in proportion to the amount of resources used. Stage two identifies the cost drivers that corresponds with each activity and then allocates the overhead costs to each product line. Many, if not all, of Coca-Cola’s activities in production that produce a cost have a specific cost driver. When a company decides to use activity based costing as a strategy, it requires a thorough examination, analysis and understanding of all company activities. Through the analysis of cost drivers, Coca-Cola has been able to have a better understanding of the correlation between the costs they have incurred and the activities that cause the incurred costs. Having activities attached to cost drivers allows for a more accurate result than spreading costs across products, like in process costing.
Coca-Cola was one of the first companies that implemented activity based costing and they have made essential impacts on the ability to track and control expenses at a very specific level. This is just another example of how the Coca-Cola Company has had an impact on the foundation for the beverage