M2 discussion managerial accounting

Unit 2: Module 2 - M2 Assignment 1 Discussion

Discussion Assignment

Assignment 1: Discussion—Activity-Based Costing System

Activity-based costing is one of the most accurate methods that can be used to allocate overhead. However, it is not often used in many smaller organizations due to the substantial cost involved with its implementation.

Using the module readings and the Argosy University online library resources, research the activity-based costing method. Use your research and/or your experiences as a working professional to complete this assignment.

Respond to the following:

If you have utilized an activity-based costing system in your former or current employment, describe how this system had been used. In your response, be sure to include your experience and position on the effectiveness of the activity-based costing system. Support your ideas by drawing on your readings and scholarly articles. If you have not encountered this type of system in your work experience, assume a company needs to switch to an ABC system. Describe the common cost drivers that could be used. How would the organization identify the cost drivers? How would the organization use them in the implementation of this system? You may use your former or current company for the analysis.

Write your initial response in 3–4 paragraphs. Apply APA standards to citation of sources.

By Saturday, June 21, 2014, post your response to the appropriate Discussion Area. Through Wednesday, June 25, 2014, review and comment on at least two peers’ responses.

Do the following when responding to your peers:

Read all posts from your peers. Explain how their experiences differ from yours. Provide substantive comments by contributing new, relevant information or quotes from course readings, Web sites, or other sources; building on the remarks or questions of others; or sharing practical examples of key concepts from your experiences, professional or personal.

Assignment 1 Grading Criteria
Maximum Points

Initial response:

Was insightful, original, accurate, and timely. Was substantive and demonstrated advanced understanding of concepts. Compiled/synthesized theories and concepts drawn from a variety of sources to support statements and conclusions.

16

Discussion response and participation:

Responded to a minimum of two peers in a timely manner. Offered points of view supported by research. Asked challenging questions that promoted the discussion. Drew relationships between one or more points in the discussion.

16

Writing:

Wrote in a clear, concise, formal, and organized manner. Responses were error free. Information from sources, where applicable, was paraphrased appropriately and accurately cited.

8
Total:
40

Arrow Use the Respond link to post responses and materials that pertain to this assignment. Use the Respond link beneath any existing postings to respond to them.

Assignment 1: Discussion—Activity-Based Costing System

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Collapse Mark as Unread DiggsP_M2_A1_Discussion Premia Diggs-Sanchez Email this Author 6/21/2014 11:35:08 PM

Activity-based costing is used to allocate overhead costs to jobs or functions. (ABC) assumes that the process or steps must be followed to manufacture a product that determines the overhead costs incurred. Every overhead costs is assigned to a category of costs, whether variable or fixed costs. These costs categories are called activity pools. Cost drivers are the actual activities that cause the total costs in an activity cost pool to increase. Activity costs pools for example would be a purchasing department, and its cost driver would be number of purchase orders.

Now classifying activities levels helps management identify the appropriate activity drivers because the costs of activities associated with different levels respond to different types of activity drivers. The four general categories include;

Batch-level activities that are performed each time a unit is produced. Purchase orders, machine set-up, and quality tests are examples of batch level activities. Another, is unit-level activities they are performed each time a batch is produced, every time a service is performed or a product is made, the cost of direct materials, direct labor, and machine maintenance are examples of unit-level activities .

product-level activities are performed that enable the various products of a company to be produced, and facility-level activities which are those that sustain a factory’s general manufacturing process such as providing facilities, maintain grounds and providing plant security.

Cost drivers link activities together. Thus if a batch of 20,000 units of product to be manufactured required 100 different components, the size of the order and the number of components would drive the costs associated with purchasing, receiving, inspecting and handling the material among the many factors of production

Another example, an activity chosen is machine set-ups, then its cost driver would be setup labor hours, in a chart it would be followed by estimated overhead cost for the activity, and then estimated number of cost driver units giving the company a rate of how much per hour.

Resources Cited

Garrison, R. (2012). Managerial Accounting [VitalSouce bookshelf version]. Retrieved from http://digitalbookshelf.argosy.edu/books/0077588002/outline/7

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Collapse Mark as Unread RE: DiggsP_M2_A1_Discussion Gurnie Leary Jr Email this Author 6/21/2014 11:44:30 PM Hello Premia,

In using the ABC method, do you find that most companies would benefit from a cost increase from a manufacturing standpoint?

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Collapse Mark as Unread RE: DiggsP_M2_A1_Discussion Faculty Richter Email this Author 6/22/2014 10:34:07 AM Might machine set up cost be involved in the overhead of a project? Since it is only done one time? Why or why not?

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Collapse Mark as Unread RE: DiggsP_M2_A1_Discussion Stephanie Rich Email this Author 6/25/2014 7:42:33 AM Premia, could you apply ABC to the industry that you work in? If so how?

Stephanie

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Collapse Mark as Unread learyg_M2_A1Discussion Gurnie Leary Jr Email this Author 6/21/2014 11:41:07 PM

LearyG_M2_A1 Discussion Activity Based Costing System

My experience with utilizing the ABC process, I was able to be a part of a company (M Cubed Technologies) that utilized the ABC system as a cost accumulating process. The daily operation of M Cubed’s Technology requires the use of a three base operating procedures to complete the job orders per the customer. In each of these segments a measure of performance for the job goes through a process of eliminating that will not be needed in order move forward with the project type for the job. Based on the manufacturing of the many different components such as reaction bonded ceramic materials or semiconductors products, each cost is determined by the product that is being produced.

Most companies utilize the ABC process to retain a basic outcome of their profit as a company. There is another area of concern regarding the simplicity of using an ABC approach, and that is the area of implementing Activity Based Costing Control (ABCC). This particular segment of application allow the company to departmentalize each area of cost to be used and enhance the product line, time, quality and the structural concept in building a successful process of distribution for goods and services geared towards the customer service. (Adams, Rodney B (1994)

With the use of ABC (Activity Based Costing) the general idea is to inform each department implementing this process where costing is involved. There are several components of the costing process that goes into determining the final analysis of the product. As a company that deals with several areas of which is a part of developing the product for the customer, each area is responsible for the costing process that will result in the final pricing of the product. The two segments of concern are financial and management. Now it determines what kind of business and product services is being rendered for the final cost of the job order. (Hundal, M. (1997)

Considering the action that is needed to complete any type of job order there must be a plan of action. The ABC process is put in place to recognize the pricing for each step taken in producing quality work. Companies should value the pieces used to develop an activity based concept that will measure the costing process their customers. Here are some areas that will make up some cost drivers that are used on a daily basis for most companies:

a. Purchase orders – Developing a product is driven by that of the order being established by the vendor and the customer. The determining factor of the cost is driven at the amount of orders placed.

b. Machines needed for use of product activity: This is another cost driven segment that is accessed during the process of the product

c. Direct Labor Hours is definitely a cost driver, and without the resources of direct labor there is no productivity. (http://www.svtuition.org/2011/04/cost-drivers-examples.html)

Reference

Hundal, M. (1997). Product costing: A comparison of conventional and.. Journal Of Engineering Design, 8(1), 91.

https://login.libproxy.edmc.edu/login?url=http://search.proquest.com.libproxy.edmc.edu/docview/208210469?accountid=34899

http://www.svtuition.org/2011/04/cost-drivers-examples.html

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Collapse Mark as Unread RE: learyg_M2_A1Discussion Faculty Richter Email this Author 6/22/2014 10:56:55 AM Gurnie you mention cost control and education. Do you think that is one of the more effective ways to get managers to understand the ABC system and to look at everything in the cost area? Why or why not? Class feel free to chime in.

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Collapse Mark as Unread RE: learyg_M2_A1Discussion Gurnie Leary Jr Email this Author 6/22/2014 1:16:55 PM It would be a great idea for managers to develop a system to where they can track orders while monitoring the process of shipments going per customer orders. A Cost control system can be a tremendous help for managers if correctly utilized. The ABCC (Activity-Based Costing Control) system can penetrate the barriers of an otherwise complicated system being used at the present by the company. It will cut the cost of companies over spending in areas where they can save money, and still provide quality customer service, product distribution that will keep cost down. This process will allow the manager(s) to access the value of the cost drivers and properly used these cost drivers to effective in the manufacturing process.

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Collapse Mark as Unread RE: learyg_M2_A1Discussion Premia Diggs-Sanchez Email this Author 6/22/2014 4:42:20 PM Thank you for your post! it was a great example and readable article. most companies now a days would love to know where there money goes precisely, and this can be closely done by using the ABC system, however most smaller companies do not pursue such a system do you know why? also one of the important steps is getting every one on board to implement the system, what are some of the teams that they create in order to create synergy.

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Collapse Mark as Unread RE: learyg_M2_A1Discussion Gurnie Leary Jr Email this Author 6/24/2014 6:56:22 PM

Hello Premia,

Thanks for your response, it really helps me to get a foothold on what I need to do to better posting of the assignment.

ABC is mostly utilized by larger organizations, but lately smaller companies have implemented this process as a part of their manufacturing accumulating cost system. The smaller companies are starting to realize they can make better use of the ABC system, and managers are noticing the use of direct labor costing is not giving them the answers needed to fulfill the outcome of their cost analysis. Over the last several years smaller businesses are finding out by implementing the ABC process they are saving more of the costing process. (www.journalofaccountancy.com)

When a smaller company is looking to implement new systems that will enhance the productivity of the company, it is very important to include the employees within the decision making of moving forward in a new direction.

Reference

Journal of Accountancy. (n.d.). Journal of Accountancy. Retrieved June 24, 2014, from http://www.journalofaccountancy.com/ Respond
Collapse Mark as Read RE: learyg_M2_A1Discussion Stephanie Rich Email this Author 6/25/2014 7:46:56 AM Gurnie, What are the three base operating procedures that you mentioned M Cubed's Technology requires?

Stephanie

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Collapse Mark as Read M2A1 Nathan Mahaffey Email this Author 6/22/2014 7:51:42 PM

The majority of the costs in the painting business I ran were variable. This included items such as labor and paint. My overhead was primarily equipment. One item of equipment I would use was a power washer. I would use this to clean the house prior to painting. This was needed on dirty houses. If the house was already clean, or I was painting the interior, I wouldn’t need to use the power washer. I then developed a costing system where only the jobs that required the use of the power washer would be charged for it.

The power washer I used costs around one thousand dollars to purchase. At the start of the year, I had planning to complete around 50 jobs during the summer. This number was determined based on revenue goals and average job size. I then decided to charge $50 per job that required power washing. This was on top of the additional labor time the power washing would require. Around ½ of the jobs would require power washing. This equates to $1,250 power washing revenue and my cost was $1,000. There was some slight cushion for gas and error.

Interestingly, this was the only overhead item that was activity-based cost accumulated. Considering that ladders were used in every project, I didn’t apply them as a cost in every job. It was understood that my profit margin would be non-existent until my overhead was covered. If I were to do it differently, I would institute a tiered equipment charge system based on the project size. This means that large projects, were my equipment was used more, would pay more for doing so.

The advantage of an activity based costing system comes for the ability to accurate price the product or service (Averkamp, n.d.). If I were to charge a power-washing fee to every customer regardless to their needs, I may potentially lose some business to cheaper bids.

Resource

Averkamp, H. (n.d.). Activity Based Costing | Explanation | AccountingCoach. Retrieved from http://www.accountingcoach.com/activity-based-costing/explanation

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(an instructor response)
Collapse Mark as Read RE: M2A1 Faculty Richter Email this Author 6/23/2014 9:35:50 AM Considering that you did use ladders on every project, and that they are not that expensive, it does roll into your overhead cost, for the business and not per job. Did you think about costing any of the ladders to the jobs, such as if you had a really tall building and needed the extra length? Why or why not?

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Collapse Mark as Read RE: M2A1 Nathan Mahaffey Email this Author 6/26/2014 4:44:48 PM Erik,

Overall ladders can be expensive. Anywhere from 200-400 per ladder. Each job site would require around 4-5 ladders. I never priced them into the job directly. It was just assumed that there would be no profit margin until the ladders were paid for. However, I think I would do that differently now. Thanks for you questions!

-Nathan

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Collapse Mark as Read RE: M2A1 Paul Joseph Email this Author 6/23/2014 10:44:50 PM Nathan,

Your use of the activity based cost for painting business was a reliable method to use in determining the margins area of potential increase in profitability with your company. Though the system can be time consuming to implement, the process allows a much better understanding of the company overhead. Did the system provide you with how much potential revenue could have been conducted if you had done 60 or 70 jobs(activities) and by potentially hiring another staff member?

Paul

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Collapse Mark as Read RE: M2A1 Nathan Mahaffey Email this Author 6/26/2014 4:50:34 PM Paul,

Yes, I could calculate potential profit by how many jobs would be produced. This was done by knowing my average job size and contribution margin. Obviously, I would need to hire extra marketers or sales people to acquire the extra work. This means my profit margin would be lower. I would made a spread sheet to figure in the cost of additional revenue.

-Nathan

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Collapse Mark as Read RE: M2A1 Gurnie Leary Jr Email this Author 6/24/2014 7:03:48 PM Hey Nathan,

Seeing that there is some slightly difference in making a profit for the painting business due to having to charge for each job order separately, could possibly be another way of implementing the ABC process in a more defining way to where you can properly charge without making such huge changes in the business setup? I do see that you are accurately applying the necessary cost to those areas where they are needed, and with these costs be variable costs could you still come out ahead at the end?

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Collapse Mark as Read RE: M2A1 Nathan Mahaffey Email this Author 6/26/2014 5:01:31 PM Gurnie,

I think I could've attempted to price the ladders into each job separately. I hadn't done this because I didn't know how many jobs I would get. With manufacturing, you have control over your production. This lets you more accurately predict your ABC overhead. Thanks for your response!

-Nathan Mahaffey

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Collapse Mark as Unread RE: M2A1 Premia Diggs-Sanchez Email this Author 6/25/2014 3:10:00 PM Thank you for your posts, it was an excellent example of how implementing a ABC system verses a traditional system saves money and helps a company determine what money needs to be spent exactly, this system has worked for you and has helped you narrow down on what money needs to be allocated somewhere and not else where.

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Collapse Mark as Read JosephP_M2A1_Activity-based Cost System Paul Joseph Email this Author 6/22/2014 9:58:44 PM

Activity-Based Costing System

Amica Insurance Company is a national mutual insurance organization that offers personal lines insurance as well as life and fixed annuity products. Several years ago while working for the company as a manager in one of the challenged branches in Knoxville, Tennessee, the organization decided to implement a Activity-Based Cost (ABC) System. The ABC System is a strategic costing technique that develops relationships between consumption of resources, generates cost, the use of the product cost, and identifies indirect costs (Chivaka & Cairney, 2007). One of the primary reasons why they chose to use the system was because the Tennessee market seemed saturated by old insurance companies who had been around for quite some time provided competitive pricing and we were failing. Also, because the area was a new market for our company there seemed to be a limited understanding of the potential claims patterns within the marketing eating at our profits.

Amica decided to tackle the problem head on and worked closely with the both the underwriting division and claims department to determine cost efficiencies in bringing product development quality, cost, and increased profitability. The organization actuarial teams in the home office in Providence Rhode Island setup a separate six-person team to recalculate our premium expenses for the Tennessee market. After going through the prior three years of actual data analysis, competitors pricing, claims and internal underwriting process, they were able to plug all the data into the ABC system.

Amica’s team was able to pin-point several areas of opportunities that everyone had thought was the issue such as the company not being competitively priced as we should and the amount of time a policy holder has their policies compared to the time a claim was filed. For example, the premiums collected on a single-family home insurance policy per year were on average $1,200.00. However, the average claim per year per home based on policy count was approximately $6,000 - $8,000. Apply individual labor cost in processing of each claim and decreased the efficiencies within multiple areas. The basic principle of the ABC system is to identify activities of the organization and calculate the cost of each activity and the cost of product base on the consumption of activities (Gunasekaran, 1999). With this new analysis, Amica was able to set some significant increase in their standards to increase their process improvement by working with each department and managers to monitor the underwriting of policies while ensuring accurate cost objectives were met.

Reference

Chivaka, R., & Cairney, C. (2007). STRATEGIC COST MANAGEMENT: An activity-based costing approach. Accountancy SA, , 28-31. Retrieved from http://search.proquest.com/docview/215224967?

Gunasekaran, A. (1999). A framework for the design and audit of an activity-based costing system. Managerial Auditing Journal, 14(3), 118-126. Retrieved from http://search.proquest.com/docview/274638031?

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(an instructor response)
Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Faculty Richter Email this Author 6/23/2014 9:39:31 AM Amica seemed to have a good experience in TN, however, what do you think they might have done if the case was reversed, meaning they could not compete with the old insurance companies? Why?

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Paul Joseph Email this Author 6/23/2014 10:03:58 PM Amica Insurance most likely would have tried to create a new marketing brand geared towards specific what is considered premium clients such as doctors and lawyers and executives using increased market revenue to generate those segments to gain their return on investment. That was the model they've used for years without using actual agents. The company seem to believe that if there are no interest and focused commission structure then both the consumer and the company wins when being a mutual company, the consumer owns a small portion of the company.

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(an instructor response)
Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Faculty Richter Email this Author 6/24/2014 11:48:44 AM Would you change that structure, or how might you change that structure?

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Paul Joseph Email this Author 6/25/2014 9:54:21 PM I was an Allstate agent and what I've found is that it is the market you focus your business in drives the direction of your profit margin and if that area becomes saturated then diversification of your portfolio must take place. Many years ago USAA insurance company did the same thing by focusing on offering their products to officers. Now, they have diversified their portfolio to enlisted and dependents to expand their market share. With the Amica model, being adaptable to the market is what would create their competitive edge and therefore would be the process I would implement.

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Gurnie Leary Jr Email this Author 6/24/2014 7:12:49 PM Hello Paul

With Amica implementing the ABC process as part of their accumulating cost system, do you know if it is still in place today?

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Gurnie Leary Jr Email this Author 6/24/2014 7:14:57 PM Could ABC be a process that insurance companies use in today's economy to attract more customers?

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Paul Joseph Email this Author 6/25/2014 10:12:10 PM Gurnie,

I don't have access to that data and can only assume that they made modifications to the system. I left the company in 2005 and from what I can tell, they are still in the market and even relocated their office just a few miles so the assumption is that they're doing great.

Paul

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Stephanie Rich Email this Author 6/25/2014 7:51:25 AM Paul, did Amica reduce their price or premiums? How did they find their competitive edge? Are the still successful in that market?

Stephanie

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Paul Joseph Email this Author 6/25/2014 10:17:21 PM Stephanie,

They are indeed still in the market and seemed to have made significant adjustment to their premium structure. When I left the company strategic process was to go into a market with quality products at a competitive pricing. However, the southern market are extremely loyal to their agents so we had to consider reducing our cost, take short-term loss to gain market share then increase to the "competitive" pricing.

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Malebo Marutle Email this Author 6/25/2014 12:21:30 PM Paul,

With a change in the ABC structure based on the $6000-$8000 per year as compared to the old $1200, I'm curious to find out how they stayed competitive. The review of their overhead allocation was definitely in order. They were under estimating the underwriting by 5-6.6 times. That's a lot of profit loss. Policy restrictions and some incentives had to surely be enstated in order to become profitable while attracting customers. Do you agree with their strategy?

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Collapse Mark as Read RE: JosephP_M2A1_Activity-based Cost System Paul Joseph Email this Author 6/25/2014 10:24:19 PM Malebo,

The figures that the actuarial department had to go through were astronomical and I certainly appreciated their hard work. There where multiple approaches that they made adjustment to and not only pricing. The amount of time individuals processed claims had to be reduced because the labor power and time it took needed to be more efficient. Employee contact with customer to closing the sale had to be resolved as far as time goes. Brand marketing and location were also factors they considered.

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Collapse Mark as Read M2 DQ Malebo Marutle Email this Author 6/22/2014 11:56:20 PM Activity based accounting is concerned with allocating overhead for indirect cost. I once worked for a film production company. Direct costs were itemized on the quote and invoicing. Direct costs would be invoiced based on the job. For instance, if a project required a rental of a hotel for a scene then that was directly charged to the project. Most of the time it was fairly simple to even calculate the post-production, but sometimes it would still be off. In order to prevent the company from experiencing a loss and planning for unforeseen events; a standard 15% of total costs was added to most invoices. This 15% would also cover all the overhead costs.

Overhead costs that would be paid for would include rental space for the office, upgrading of software, office utilities and additional consultations. I started keeping a closer tab on the actual overhead costs and the cost was often over the 15% allocation base. When this occurred I would alert the owner so he be sure to let the client know that additional payments will be required. Before tracking of these costs, the owner wouldn't have a clue and wouldn't profit very much from some projects. He was good about saving his receipts so it only took just a few projects to notice how his bottomline was being affected. This also helped create a different invoicing structure for certain projects such as school sponsored and Public Service Announcements. We ended up having to get very basic on these shoots as there was no margin to reclaim any additional costs.

ABC is helpful because all costs have to be paid for and need to be accounted for. Neglecting indirect costs only skews the results and robs the company of additional profits they could be making.

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(an instructor response)
Collapse Mark as Read RE: M2 DQ Faculty Richter Email this Author 6/23/2014 9:37:03 AM Have you ever been in a situation where they neglected indirect costs or had a "special" indirect cost such as bribes or or type of business transactions?

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Collapse Mark as Read RE: M2 DQ Paul Joseph Email this Author 6/23/2014 10:26:10 PM Malebo,

Great job in identifying the specific cost associated with actual overhead cost. Control of overheads consisting of fixed and variable becomes possible by controlling and monitoring activities and you did exactly that. Linkage between cost and activities are clearly identified in activity-based costing and thus provides opportunities to control overhead costs (Anonymous, 2014). How did you structure your invoices from that particular point?

Anonymous, (2014). Account Management Practicies. Retrieved from http://accountlearning.blogspot.com/2011/07/advantages-and-disadvantages-of_06.html

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Collapse Mark as Read RE: M2 DQ Stephanie Rich Email this Author 6/25/2014 7:49:48 AM Malebo, Did your boss start adding an additional charge or increase his price on future shoots to recover his expenses? Is he still in business and what helped him recover? Does he still use ABC?

Stephanie

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Collapse Mark as Read RE: M2 DQ Malebo Marutle Email this Author 6/25/2014 12:25:45 PM Stephanie,

My boss now works across the street from my job at the Colorado History Museum. He is still in film production but he's a full time staffer so he has a guaranteed payments and hours. It became really difficult to stay competitive and recover ALL costs. Revising his accounting practices really opened up his eyes to how much he was spending and he decided it wasn't worth it. He does side jobs to keep his name out but his bread and butter has changed.

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Collapse Mark as Read Module 2 Assignment 1 Stephanie Rich Email this Author 6/25/2014 7:33:30 AM

Activity Based Costing

The company I currently work for utilizes the Activity-Based Costing (ABC) for our commercial division. Although, I have not had the opportunity to work closely with it, every job has internal costs, labor, expenses, salaries and overhead allocated to every service order. Our commercial division offers cabling, data center relocation, fulfillment logistics, furniture delivery, installation and reconfiguration, move coordination and relocation management, transportation and freight, etc. When an order is processed Movers Suit (our moving software) automatically assigns labor, expenses, fuel, storage and overhead to a particular job. This is effective for our commercial division to allocate the expenses to each particular job. The facility is not large; this particular division has their own staff of 6 plus a dozen or so crewmembers and drivers. It produces a high amount of revenue because of the extent of the job, but does not require a large staff, high overhead, or complex systems, using the same system that corporate does, making ABC an ideal way to allocate expenses.

The costs drivers would be the truck, (including maintenance, license’s, insurance), claims, sales, and storage. The cost driver is a duration driver, measuring the amount of time of a particular activity. Johnson’s has a safety department that closely monitors the condition of the truck, the insurance and license’s. Proper training and extensive background screens are done to insure safe, quality employees, reducing claims and expediting service. Exposure and marketing done efficiently can increase work orders for minimal expenses, in addition to exceptional service. The sales staff is paid on a commission only basis, so we are only paying for sales staff when an order is produced. The storage facility will house inventory that needs to be stored for brief or long periods of time, all expenses are added to the costs of storage as well. All of these particular cost drivers can affect the cost of services, making ABC an appropriate way to distribute expenses.

Garrison, R. (2012). Managerial Accounting [VitalSouce bookshelf version]. Retrieved from http://digitalbookshelf.argosy.edu/ - /books/0077588002/content/element/15066?locs[]=115-4&locs[]=318-4&locs[]=423-4&locs[]=508-7&locs[]=529-7&locs[]=550-7&locs[]=679-7&locs[]=833-7&locs[]=909-7&locs[]=984-7&q=cost+drivers

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(an instructor response)
Collapse Mark as Read RE: Module 2 Assignment 1 Faculty Richter Email this Author 6/25/2014 11:26:56 AM Where do you think the company might be able to make things more efficient by controlling a cost driver better? How?

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Collapse Mark as Read RE: Module 2 Assignment 1 Stephanie Rich Email this Author 6/25/2014 10:39:30 PM Erik, The first thing that comes to mind is assessing the storage facility. The cost of leasing a facility is growing but the cost of storage is not. It is not profitable according to Mr. Johnson, "we need to examine the market for storage more closely and see how we can reduce costs." By doing this we can determine if the commercial storage facility will remain open or close.

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Collapse Mark as Read RE: Module 2 Assignment 1 Malebo Marutle Email this Author 6/25/2014 12:32:36 PM Stephanie,

Your Mover's Suit division uses completely different software than the moving and storing? I'm actually impressed that they are only staffed by 6 people and are still quite effecient. The manager of this division must have been very keen on reducing costs. I would think the owner would be able to understand how the Mover's Suit is so effecient and be okay with transitioning to a more useful ERP. I still wish you well in trying to convince him to switch over to a more effecient HR system.

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Collapse Mark as Read RE: Module 2 Assignment 1 Stephanie Rich Email this Author 6/25/2014 10:44:37 PM Malebo, Mover's Suit is the system that is used by all agencies within our company. The commercial division is only staffed by 6 people, such as a Manager, dispatcher, warehouse manager, 2 administrators and a coordinator. However, they also have approximately 12 or so crew members/drivers. I still intend to introduce the more efficient H.R. System, I just went threw employee files tonight and we currently have 522 active employees. Way to many for one person to handle! Thanks for keeping me on my toes!

Stephanie

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Collapse Mark as Read RE: Module 2 Assignment 1 Nathan Mahaffey Email this Author 6/26/2014 4:59:10 PM Stephanie,

Is the overhead in each job broken into subcategories? What is defined as overhead can change from place to place. Also, did they use a percentage to calculate overhead? I remember you saying something that all places use the same percentage. Do you think this is a good process to follow?

-Nathan

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(an instructor response)
Collapse Mark as Read Discussion Summary Faculty Richter Email this Author 6/26/2014 5:21:21 PM Good posts about ABC and many other aspects of it. There was great insight and questions into the topic by all. Keep up the great work everyone!

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