Activity based costing
Part 3
Case Analysis Report – DBS Consulting Services
Executive Summary
This report provides an analysis of Activity Based Costing systems and Conventional Costing systems to determine whether the application of Activity Based Costing concepts would be useful at DBS Consulting Services.
A profitability analysis of the two consulting services offered by DBS Consulting Services (e-Commerce Consulting and Information Systems Consulting) was performed using Activity Based Costing and Conventional Costing.
Using the conventional costing approach, the overheads of $342,000 were allocated at $129,960 (e-Commerce Consulting) and $212,040 (Information Systems Consulting). Using the Activity Based Costing approach, the overheads of $342,000 were allocated at $107,160 (e-Commerce Consulting) and $234,840 (Information Systems Consulting).
Before implementing an Activity Based Costing system, management needs to assess the problems that the firm is facing so that the Activity Based Costing system can be designed to address those problems. DBS Consulting Services is in a tight local labour market and is having difficulty finding quality staff.
It was found that E-Commerce Consulting Services provided a higher income per billings percentage than that of Information Systems Consulting Services (19% vs. 3%) under the Activity Based Costing approach. E-Commerce Consulting Services provided the higher return per sales dollar. These results would suggest that the professionals at DBS Consulting Services need to spend more time in e-Commerce.
The success of failure of Activity Based Costing approach is determined by the reactions of the people who develop and use the system.
An Activity Based Costing system can be costly and time consuming to implement and maintain, it requires extensive training, expertise and information. However, the benefits of Activity Based Costing systems, being improved cost accuracy and assisting management with decision
Case Analysis Report – DBS Consulting Services
Executive Summary
This report provides an analysis of Activity Based Costing systems and Conventional Costing systems to determine whether the application of Activity Based Costing concepts would be useful at DBS Consulting Services.
A profitability analysis of the two consulting services offered by DBS Consulting Services (e-Commerce Consulting and Information Systems Consulting) was performed using Activity Based Costing and Conventional Costing.
Using the conventional costing approach, the overheads of $342,000 were allocated at $129,960 (e-Commerce Consulting) and $212,040 (Information Systems Consulting). Using the Activity Based Costing approach, the overheads of $342,000 were allocated at $107,160 (e-Commerce Consulting) and $234,840 (Information Systems Consulting).
Before implementing an Activity Based Costing system, management needs to assess the problems that the firm is facing so that the Activity Based Costing system can be designed to address those problems. DBS Consulting Services is in a tight local labour market and is having difficulty finding quality staff.
It was found that E-Commerce Consulting Services provided a higher income per billings percentage than that of Information Systems Consulting Services (19% vs. 3%) under the Activity Based Costing approach. E-Commerce Consulting Services provided the higher return per sales dollar. These results would suggest that the professionals at DBS Consulting Services need to spend more time in e-Commerce.
The success of failure of Activity Based Costing approach is determined by the reactions of the people who develop and use the system.
An Activity Based Costing system can be costly and time consuming to implement and maintain, it requires extensive training, expertise and information. However, the benefits of Activity Based Costing systems, being improved cost accuracy and assisting management with decision
References: Langfield-Smith, K., Thorne, H., & Hilton, R. (2012). Management accounting: Information for creating and managing value (6th edition). North Ryde, NSW, Australia: McGraw-Hill. Heisinger, K., & Hoyle, J. (2013.). Managerial Accounting,v.1.0. Retrieved April 10, 2014 from http:/catalog.flatworldknowledge.com Johnson, R. (n.d.). Traditional Costing Vs. Activity-Based Costing. Retrieved April 1, 2014 from http:/smallbuiness.chron.com Wilkinson, J. (July 23, 2013). Activity-based Costing (ABC) vs Traditional Costing. Retrieved April 1, 2014 from http:/strategiccfo.com Marx, C. (n.d.). Activity Based Costing (ABC) And Traditional Costing Systems. Retrieved April 4, 2014 from http:/financialsupport.weebly.com Keshav. (n.d). Advantages And Disadvantages of Activity-Based Costing (ABC). Retrieved April 1, 2014 from http:/accountlearning.blogspot.co.nz Delaware Technical Community College. (n.d.). Retrieved April 1, 2014 from https://www.dtcc.edu