Instructor: Hector Iweka
November 30, 2015 Glaser Health Products Company of Ranier Falls, GA
The Glaser Health Products Company of Ranier Falls, Georgia has recognized the detailed accounting and meticulousness of the Activity-Based Costing systems. The Activity-Based Costing (ABC) system, is considered to be a sophisticated method that assigns overhead cost into two stages (Lelkes, & Deis 2013). In the first stage of Activity-Based Costing, cost are allocated by accounting activities and they are then categorized in different levels Lelkes, & Deis (2013) such as unit-level, batch-level, product-level and facility-level. (p. 58). In the second stage of cost activities …show more content…
As noted in the paper, DEVELOPING A GREY ACTIVITY BASED COSTING (G-ABC), “ABC basically assumes that products requires activities, activities consume resources, and resources cost money.” (Raeesi, & Amini 2013). Using activity-based costing assist in making more accurate distribution of overhead costs and provides detail information regarding resource usages and indirect costs. It is valuable for Glaser to use a preliminary stage cost drivers in connection to the costs of resources using the Activity-based costing system. Glaser will need to assign one activity center to other activity centers. Connecting cost, such as batch-level activity to costs center are primarily assigned to a primary stage, and they will only need a single allotment process, that will be traceable to detailed products but often are used as cost …show more content…
Using preliminary stage cost drivers, explain how individual items of costs will be traced to activity groupings. In product-level activity center costs a specific product are grouped by activities before it is assigned to products at the primary stage. Finally, in facility-level in the ABC system, cost are assigned from one activities to another activities. Contrariwise, primary stage cost drivers are assigned to costs activities to the cost objectives. This process sets the primary goal in the ABC system for product costing to “generate accurate product costs.” (Schneider, 2012).
In conclusion, I believe that it was a good decision for management to implement an activity-based costing system within their company. Executing the ABC system is important for organization, because it helps them focus on the costs, revenue, profit and value in both internal and external angles, which is vital in a competitive business environment. (Petrova, & Zarudnev 2013).) Since, Glaser wants to recognize costs used for planning and to control decisions making rather than for inventory valuation. It will be more beneficial for Glaser to use an activity-based costing system to offer a better profitability measurement, Improve business decision-making, and process