How can activity-based management and activity-based costing (ABC) benefit an organization? Specifically, address the following points.
• How does ABC differ from other allocation methods?
• Describe the main characteristics of ABC.
• What type of companies tends to benefit from ABC?
• Comment on a company (research internet) that has implemented ABC.
What type of company is it?
Was it successful?
In the early 1980s, there were businesses that started to introduce activity-based costing (ABC) systems. The goal of the systems were to achieve a more accurate calculation of product costs. However, it soon became apparent that the information that had been produced for activity based costing had much wider use than just calculating the cost …show more content…
First, it expands the number of cost pools that can be used to assemble overhead costs and creates new bases for assigning overhead costs to items that costs are allocated on the basis of the activities that generate costs instead of on volume measures such as machine hours or direct labor costs. Finally, ABC system alters the nature of several indirect costs. Companies such as Construction and Health Care benefit from activity-based costing. They have significant overhead, such as construction bond purchases, large equipment and machinery and skilled personnel (Wright, 2016). They also usually either have a range of complex service lines – for example, two warehouse construction projects and two office exterior renovations of different sizes – or a diverse range of projects (Wright, …show more content…
Comment on advantages and disadvantages of using this approach for performance evaluations.
• Do you have any suggestions for complementary or alternative performance measures?
There are several benefits of preparing a budget. It provides a financial road map that can help an organization decipher how to get from one place to the other. It is an effective management tool that allows management to see if they are on track with their goals. It can bolster revenue and provide internal control. For most people, the word “budget” is associated with the allocation and management of money. For organizations, especially nonprofits, a budget can—and should—do much more (Abdo, 2016, Pg. 1).
Large corporations with sophisticated formal planning systems use budgets extensively for control- first for coordinating dispersed business units and later, for evaluating units’ performances. Small company managers have less need to use budgets in this way since they control their businesses informally and personally (Churchill, 1984).
There are several benefits or advantages of using variance analysis tools for performance evaluations. It facilitates communication among managers and supervisors which encourages employees to perform better. It motivates employees to reach their
• How does ABC differ from other allocation methods?
• Describe the main characteristics of ABC.
• What type of companies tends to benefit from ABC?
• Comment on a company (research internet) that has implemented ABC.
What type of company is it?
Was it successful?
In the early 1980s, there were businesses that started to introduce activity-based costing (ABC) systems. The goal of the systems were to achieve a more accurate calculation of product costs. However, it soon became apparent that the information that had been produced for activity based costing had much wider use than just calculating the cost …show more content…
First, it expands the number of cost pools that can be used to assemble overhead costs and creates new bases for assigning overhead costs to items that costs are allocated on the basis of the activities that generate costs instead of on volume measures such as machine hours or direct labor costs. Finally, ABC system alters the nature of several indirect costs. Companies such as Construction and Health Care benefit from activity-based costing. They have significant overhead, such as construction bond purchases, large equipment and machinery and skilled personnel (Wright, 2016). They also usually either have a range of complex service lines – for example, two warehouse construction projects and two office exterior renovations of different sizes – or a diverse range of projects (Wright, …show more content…
Comment on advantages and disadvantages of using this approach for performance evaluations.
• Do you have any suggestions for complementary or alternative performance measures?
There are several benefits of preparing a budget. It provides a financial road map that can help an organization decipher how to get from one place to the other. It is an effective management tool that allows management to see if they are on track with their goals. It can bolster revenue and provide internal control. For most people, the word “budget” is associated with the allocation and management of money. For organizations, especially nonprofits, a budget can—and should—do much more (Abdo, 2016, Pg. 1).
Large corporations with sophisticated formal planning systems use budgets extensively for control- first for coordinating dispersed business units and later, for evaluating units’ performances. Small company managers have less need to use budgets in this way since they control their businesses informally and personally (Churchill, 1984).
There are several benefits or advantages of using variance analysis tools for performance evaluations. It facilitates communication among managers and supervisors which encourages employees to perform better. It motivates employees to reach their