...1. Activity costing would be appropriate 1. An activity-based costing system may be appropriate for Wall Décor, when overhead allocation based job-order costing provides product cost distortion. As seen on previous case, this distortion happens when one product is manufacturing in high volume and the others are manufacturing in complexity as well as in low volume. In this situation Wall Décor should change its costing system for selling its high volume produced products whereas low-volume produced products have good profit. a. The company has three different products and each uses different resources and so ABC would given a better allocation b. ABC would relate costs to the activities and so would make cost control better. 2. The activity based rates are Activity Overhead Driver Total Activity Activity Rate Picking Prints 36,000 Number of Prints 102,000 0.30 per print Inventory Selection and Management 91,700 Number of components per print item 131,000 0.70 per component Website Optimization- Unframed 25,800 Number of prints at capacity 100,000 0.26 per print Website Optimization- framed 103,200 Number of prints at capacity 25,000 4.13 per print Framing and Matting costs 123,900 Number of components at capacity 59,000 2.10 per component 375,200 3. The cost using ABC is In the first stage we allocate the overhead cost to products ...
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...|Case 2 | | Greetings Inc.: Activity-Based Costing | |This case is from the book: Managerial Accounting: Tools for Business Decision | |Making, 5th Edition | |Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso | |©2010 | |And was answered by some students. | | | | | 1. Activity Based Costing benefits businesses that are more complex in nature. In this case, Greetings. INC has added a new product line, Wall Decor, which permits them to grow without expanding their physical stores; however, they have significantly raised their overhead costs by multiplying their cost drivers. Not to mention the fact that they have incorporated a largely automated system into their product line, which we know calls for an ABC system. The main reason to move to ABC though, I’d say, would be because it will allow management to make better decisions and move away from the “cash machine” and “lemonade stand” metaphor simply because overhead costs will be allocated in such...
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...Health Specifics of the Activity-Based Applications in Hospital Management Boris Popesko * Tomas Bata University in Zlin, Czech Republic * Corresponding Author; Email: popesko@fame.utb.cz Abstract Paper analyses the specifics of the application of Activity-Based Costing method in hospital management. Primary objective of the paper is to outline the methodology of the ABC application in hospitals. First part of the paper analyzes the ways of ABC implementation in published foreign studies. Second part describes the individual steps in ABC application and discusses the differences in the application procedures between the manufacturing and hospital organization. Key words: Healthcare Management, Cost Management, Activity-based costing, Introduction In the last decade, many non-profit and hospital organizations started to face difficulties and challenges in balancing limited resources and costs to provide their demand for services. Due to the introduction of modern medical techniques and medicines and consequent increase of consumed costs, many hospitals are under pressure to adopt more advanced cost management techniques usually utilized only in profit organization sector. Hospital managers frequently seek the advanced techniques, for better understanding of relations between the cost and provided services. One of the key factors of effective company management is ability of accurate estimation of the cost of products. Product costing is an essential economic tool...
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...2010-023X Factors Influencing Activity-Based Costing Success: A Research Framework Zhang Yi Fei and Che Ruhana Isa becoming more and more popular [3-7] ABC aims to provide accurate costing information to managers to allocate activity costs to products and services by applying cost drivers [8]. Academics who advocate ABC, such as, Cooper and Kaplan [9], and Swenson [10] argue that it provides more accurate cost data needed to make appropriate strategic decisions about product mix, sourcing, pricing, process improvement, and evaluation of business process performance. These claims have led many firms to adopt ABC systems [8]. The benefits of ABC and its positive impact on firm’s performance motivated a numerous studies which examined various aspects of ABC. Among such studies are McGowan [11] who assessed the integrity of ABC success, Innes and Mitchell [4, 12] and Yanren [13] who conducted research on factors affecting ABC adoption, and Shield [3], Shields and McEwen [14], Gosselin [15] and Baired et al.[16, 17]who concentrated on factors influencing ABC success especially at the implementation stage. However, there is mounting evidence that suggests most of firms are experiencing problems in implementing ABC and, in some extreme cases, ABC implementation is not successful [3], which later resulted in abandoning the ABC systems altogether [15]. Questions arise as to why ABC implementation is successful in certain companies and fails in others. Based on the contingency theory, researchers...
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...7107 Minor case 1 Destin Brass Products Co. 1. Background. Destin Brass Products is a company that manufactures pumps, valves and flow controllers. Roland Guidry is the president, Peggy Alford is controller, John Scott, the manufacturing manager and Steve Abbott, the sales and marketing manager, they held significant shares of this company. Pumps are the major production in the company but now they force to a situation that in this large market, other competitors reduce their prices. The revenue and gross margin of pumps begin to fall down. 2. Problems and Issues. The problem in this company is that they still using the traditional volume-based cost accounting system. From the exhibit 3 and 4 and what Peggy said, we can find that the overhead cost is large, but some of them have no relationship with the production run or labor cost, for example, the set-up labor, materials handling and the machine costing. When the overhead cost is large, the traditional cost accounting system is inaccurate. And for this company, they manufacture different products; allocate the overhead cost by traditional cost accounting system will also cause imprecise accurate. 3. Recommendation. Because the company uses the traditional volume-based accounting costing system, they allocate too much overhead costing into their product costing. And also, manufacture several products will make the OH inaccurate. So the solution for this company is to use the Activity Based costing, this costing...
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...CHAPTER 5: ACTIVITY-BASED COSTING AND MANAGEMENT QUESTIONS 5-1 Product costs are likely distorted when a firm uses a volume-based rate if the plant has more than one activity in its operations and not all activities consume overhead in the same proportion. The more diverse the product mixes of the plant are in volume, sizes, manufacturing processes, or product complexities, the greater the cost distortions are likely to be in using a volume-based rate. Undercosting a product may appear to have increased the reported profit the product earned (assuming the firm did not lower its selling price because of the reported lower product cost). However, the increased profit is, at best, a twist in truth. Costs of the product not charged to the product itself are borne by other products of the firm. Worse, undercosting a product may result in managers erroneously believing the product to be more profitable than other products and shifting the limited resource the firm has into manufacturing, promotion, and sales of the product when, in fact, other products are more profitable to the firm. Severe cost distortions may lead firms not to drop unprofitable products because the cost data show these products are profitable. 5-3 Overcosting does not increase revenues. A firm can increase the selling price of a product, thereby increasing the total revenue from the product only if the market allows. Increases in the selling price of a product without experiencing noticeable decrease in the sales...
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...[pic] Managerial Accounting BA3201 |Puganeswary Thirumalai Naidu |307254805 |BABHM | |Tan Lian Ping |11001200428010 |BABHM | |Yasmin Lim Binti Mohd.Arifin |307147803 |BBA MKT | |Herry Abubakar Mshihiri |609687502 |BBA IB | Question1 | |Task 1 : Sales and Labour Budgets : University | | | | | | | | | |1 (a) | | | | | ...
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...Towards a conceptual framework for strategic cost management - The concept, objectives, and instruments - Von der Fakultät für Wirtschaftswissenschaften der Technischen Universität Chemnitz genehmigte Dissertation zur Erlangung des akademischen Grades Doctor rerum politicarum (Dr. rer. pol.) vorgelegt von Ibrahim Abd El Mageed Ali El Kelety geboren am 11.01.1965 in El Menoufia - Ägypten eingereicht am: 14. Juni 2006 Gutachter: Prof. Dr. Uwe Götze Prof. Dr. Dr. h.c. Jürgen Bloech Prof. Dr. Peter Schuster Tag der mündlichen Prüfung: 18. Juli 2006 Acknowledgement To the Almighty God “ALLAH” Who have granted me all these graces to fulfill this work and Who supported me in all my life. To Him I extend my heartfelt thanks. It is a pleasure to express my sincere and deepest heartfelt gratitude to my “Doktorvater“ Prof. Dr. Uwe Götze for his kind supervision, continuous encouragement, valuable enthusiastic discussion and unfailing advice throughout the present work, as well as financial support during my latest period of study in Germany. He assisted in all matters, provided solutions to different problems. Prof. Dr. Uwe Götze supported and helped me during my learning period in Germany and writing this thesis. I am very lucky being one of his students. I would like to express my deep thanks to Prof. Dr. Dr. h.c. Jürgen Bloech - Georg-August University of Göttingen - for his kind acceptance to act as an examiner. I would also like to express my sincere thanks to Prof. Dr. Peter...
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...structure as them. To help draw consumers back into stores, traditional electronic retailers must adapt with the times, by updating their websites to make them on par with the online competitors, while reducing fixed costs1. 5. Prior to 1994, performance at MiCRUS was measured by comparing total costs per wafer at the MiCRUS plant to the industry benchmark. Although this method is certainly a viable option, it did not allow managers to focus on specific costs, which might be considered unnecessary. For example, the article states that in order to succeed, MiCRUS “had to be as efficient as possible, concentrating everyone’s efforts and talents on keeping costs low while maintaining rigorous technical requirements for quality”. Under the costing system at the time, this concentration on keeping costs low must have been a difficult task, as all costs were pooled together. Although the managers at MiCRUS used all available information to help them reduce costs, this information was quite vague and limited. There was still a need for more...
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...C H A P T E R F I V E INTRODUCTION TO COST MANAGEMENT Activity-Based Costing and Management After studying this chapter, you should be able to . . . 1. Explain the strategic role of activity-based costing 2. Describe activity-based costing (ABC), the steps in developing an ABC system, and the benefits and limitations of an ABC system 3. Determine product costs under both the volume-based method and the activity-based method and contrast the two 4. Explain activity-based management (ABM) 5. Describe how ABC/M is used in manufacturing companies, service companies, and governmental organizations 6. Use an activity-based approach to analyze customer profitability 7. Identify key factors for successful ABC/M implementation PART I Beware of little expenses. A small leak will sink a great ship. Benjamin Franklin This chapter has a lot to do with implementing the spirit of Benjamin Franklin’s observation—in cost management terms—that it really does matter how accurately you calculate a cost. Why? Having accurate costs is important for a variety of reasons: a company might find that it has a difficult time determining which of its products is most profitable. Alternatively, it finds its sales increasing but profits declining and cannot understand why. Perhaps the company keeps losing competitive bids for products and services and does not understand why. In many cases, accurate cost information is the answer to these questions. Accurate cost information provides a competitive...
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...Accounting Information for Managers To Make Better Decisions 1 Abstract This paper analysis how the accounting information would support the decision making process. The main goal of an accounting system is to provide financial information about the organization including financial situation and the performance of the organization. The decision makers should know the situation of the organization either by comparing competitors or previous periods’ performance in order to achieve the objectives of the company and this being possible by using accounting information. In addition, this thesis studies the importance of having effective and efficient accounting system to make better decision as it relates to increase the profitability target of an organization. Organizations should replace their weak accounting system in order to ensure that each team member in the Accounts Department is conscious of their role to produce good accounting information (1, Okoli Margaret). The result of this paper describes that providing right information to the right people in time via management reporting to maximize the use of reports in decision-making. 2 Introduction Any organization should survive and excel in the fast paced and ever changing market. We are living in the digital era so information can be found everywhere via websites, databases documents, reports, and emails. However, it’s important to read the historical data-set during decision making process but providing report in quick...
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...ADMS 3510 Group Assignment: Markworth Products (MP) Fall 2014, Section A Group members Alamgir Khandwala, 212357109 Mohammed Islam 212540191 Sobia Ali, 210515062 Summaiya Haque, 211992948 Date of submission: 9th November 2014 To: Mr. John Adam, President From: Controller Subject: Cost System and Capital Budgeting Improvement Please find attached report for Markworth Products for recommendation regarding appropriate costing system as it grows as an organization and capital budget evaluation. Kind Regards, Controller Introduction and Relevant Facts Markworth Products (MP) is a new Canadian public company in the plastic packaging products industry. It develops technologically advanced machinery and moulds that give MP a competitive advantage over its competitors. John Adam has requested us to develop efficient costing system and improve capital budgeting process. Problems Major Problems: - MP does not have an efficient costing system in place to allocate the direct manufacturing costs and indirect manufacturing overhead costs for accurate prediction of product costs. - The current approach for capital budgeting to evaluate new equipment does not meet the current industrial standards of accepted NPV practices Minor Problems: - Holding inventory for clients free of charge - Potential market loss due to emphasis on reducing costs and value leadership - Above average profits due to competitive advantage last temporarily as competitors...
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...O’Connor/Writing Lab by Friday, March 8 The Forest Hill Paper case represents an exercise in activity based costing to help you understand in greater depth how activity based costing is performed within organizations. The case suggests that developing the product cost is not the end point for the accountant – the proper evaluation and analysis of the “calculated” information is integral in making recommendations contributing to organization success. Assume that your group is a consulting group that has been hired by Forest Hill’s management team. Your group has listened to the discussions contained in the case and obtained the information contained in the exhibits. Your recommendations should be contained in a business memorandum addressed to Forest Hill’s management team. The memo should be no longer than three single spaced typed pages, excluding any relevant exhibits you may have prepared and referenced in the text of your memo. The exhibits may be attached at the end of your memo. The memo should, at a minimum, respond to the questions contained at the end of the case. This assignment will be graded in part on the “correctness” of the calculations and quantitative analysis. However, “getting the numbers right” is only the first step. A significant portion of the points will be earned by the appropriateness of your recommendations, your ability to identify the most significant issues in the case, the quality and clarity of the arguments you make supporting your...
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...Kanthal Case Analysis Dr. Joseph Szendi Managerial Accounting 640 Yega Tita Company Background /History……………………………………............………2 Current System………………………………………………………………………..4 Dilemma ……………………………………………………………………………….4 Options/Solutions………………………………………………………………….….5 Analysis…………………………………………………………………………………6 Competitive Forces……………………………………………………………………6 Porters Five Forces …………………………………………………………………...7 SWOT Analysis………………………………………………………………………..8 Strengths ……………………………………………………………………………...8 Weaknesses…………………………………………………………………………..…8 Opportunities…………………………………………………………………………...8 Threats………………………………………………………………………………..…8 Recommendations/Conclusion………………………………………………………9 References……………………………………………………………………………...10 Company background: Sandvik Materials Technology, of which Kanthal is a brand, is a world-leading developer and manufacturer of products in advanced stainless steels and special alloys for the most demanding environments, as well as products and systems for industrial heating. Kanthal is the largest of the six divisions in Sweden. There are currently 7,300 employees. Kanthal specializes in production and sales of electrical resistance heating elements. Kanthal heating Technology supplies manufacturers of electrical appliances and heating systems with wire that generates heat through electric...
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...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...
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