Activity Based Costing Systems

Good Essays

Open Document

Open Document

View Writing Issues

1182 Words

Grammar

Grammar

Plagiarism

Plagiarism

Writing

Writing

Score

Score

Activity Based Costing Systems

Activity-Based Costing Systems
Research Paper

|Matthew East |
| |
| |
| |
| |
| |
|ACCT 311 Cost Accounting |
|Professor Keith Wargo |
|September 26, 2011 |

Activity-Based Costing Systems

All over the world businesses, from major corporations to small sole proprietorships, use different costing systems to account for their operations. These costing systems help a company to gauge the cost of producing their product. From the cost of labor to the cost of materials, costing systems provide a basis for companies to gain important information on operations and performance. Activity-Based Costing is one of many costing systems currently used by companies today. In this paper, it is the intent of this writer to describe Activity-Based Costing, identify

References: Agbejule, A. (2006). Motivation for activity-based costing implementation; Administrative and institutional influences. Journal of Accounting & Organizational Change, 2(1), 42. Retrieved September 26, 2011, from the ProQuest database. Buys, P., & Green, K. (2006, November 1). Strategic Costing Techniques - Activity based Costing. Accountancy SA , 1, 36. Lanen, W. N., Anderson, S. W., & Maher, M. W. (2011). Fundamentals of Cost Accounting (3rd ed.). New York, NY: McGraw Hill/Irwin. Phillips, K. (2011, May 1). Activity-based Costing: beware of the pitfalls. Accountancy SA , 1, 9. Tarr, J. (n.d.). ACA Group - Activity Based Costing. ACA Group - Business & Management Consulting and Training for manufacturing and service organizations. Retrieved September 22, 2011, from http://www.theacagroup.com/activitybasedcosting.htm

Continue Reading

You May Also Find These Documents Helpful

Better Essays
Jet2 Task 4
- 2238 Words
- 9 Pages
Jet2 Task 4

The main difference between activity based costing and the traditional system is that activity based costing requires four steps to build its cost point. Traditional costing uses one rate where first, activity based costing must identify each activity and estimate its total and indirect cost. Second for activity based costing is that the cost driver for each activity must be estimated along with the total quantity of each driver’s allocation base. Third the cost allocation for each activity must be computed. Fourth costs to cost object are allocated. Activity-based costing focuses on activities. The costs of those activities become the building blocks for measuring (allocating) the costs of products and services. (Horngren, Harrison, Jr & Oliver, 2008) This method of costing does require more time to compute the cost to the activity yet it earns that money back plus dividends by having a more accurate forecast of the true costs that are associated with each activity.…
- 2238 Words
- 9 Pages
Better Essays

Read More
Better Essays
Rowe Potter Works - an Analysis
- 3567 Words
- 15 Pages
Rowe Potter Works - an Analysis

Kinsella, S.M. (2002). Activity-based costing: Does it warrant inclusion in A Guide to the Project Management Body of Knowledge (PMBOK guide)? Project Management Journal, 33, 2, 49-56. Retrieved October 6, 2003, from ProQuest database.…
- 3567 Words
- 15 Pages
Better Essays

Read More
Good Essays
Case 5A
- 1200 Words
- 5 Pages
Case 5A

Glaser Health Products of Ranier Falls, Georgia needs assistance in evaluating and classifying costs in order to implement an activity-based costing system. As stated in the case, these costs will be used for planning and control decisions rather than inventory valuation. The activity-based costing system will provide better allocation of Glaser’s overhead costs rather than a system to look at the cost drivers or the activities that their overhead costs comprise. Glaser’s general structure of an activity-based costing model should consist of cost objects, activities, consumption of resources, and cost.…
- 1200 Words
- 5 Pages
Good Essays

Read More
Satisfactory Essays
Acc349 Reflection Summary
- 297 Words
- 2 Pages
Acc349 Reflection Summary

One advantage of Activity-Based Costing system is it has more accurate overhead cost allocation because there are more cost pools, the costs in each pool are more similar, and allocation is based on activities that cause overhead costs. It is more effective overhead cost control by focusing on processes or activities and focuses on relevant factors by assigning costs to any cost object that is of interest to management. Lastly, it allows better management of activities by helping managers identify the causes of costs and the activities driving them. The disadvantages of Activity-Based Costing are its cost to implement and maintain ABC requires management commitment and financial resources and its uncertainty with decisions remain and management must interpret ABC data with caution in making managerial decisions.…
- 297 Words
- 2 Pages
Satisfactory Essays

Read More
Good Essays
BUSI 601 DB 1 response
- 530 Words
- 2 Pages
BUSI 601 DB 1 response

Discussion Board One asks the student to select a recognized company and a Contemporary Management Technique from Cost management: A Strategic Emphasis by Blocher, Stout, Juras, and Cokins (2013). The student is instructed to draw a parallel between the chosen company and technique, and elaborately describe how the technique would effectively aid in maximizing the company’s success. To complete this assignment, Johnathan Bradley describes the Ford Motor Company and activity-based costing. He describes the Ford Motor Company as a dominant company within the automotive manufacturing industry, and uses research performed by Eggers and Bangert (1998) to define activity-based costing as a tool that measures costs based on segmented activities. Jonathan effectively uses the study to capture the advantages of activity-based costing, and gainfully applies these findings to Ford Motor Company. He illustrates how the use of activity-based costing would support the company’s critical success factors by increasing quality levels and improving cycle time. Additionally, Jonathan explains how the utilization of this Contemporary Management Technique would aid Ford Motor Company in effectively dividing costs based on activity, which would allow the company to ensure maximum efficiency throughout all activities.…
- 530 Words
- 2 Pages
Good Essays

Read More
Powerful Essays
Global Electronics
- 8642 Words
- 35 Pages
Global Electronics

Shields, M. 1995. An empirical analysis of firms ' implementation experiences with activity-based costing. Journal of Management Accounting Research 7: 148-166.…
- 8642 Words
- 35 Pages
Powerful Essays

Read More
Powerful Essays
Cost Accouting Systems for John Deere Component Works
- 1975 Words
- 8 Pages
Cost Accouting Systems for John Deere Component Works

Deere & Company is an iconic American corporation, renowned for being the world’s leading manufacturer of agricultural equipment. Founded in 1837 by John Deere, the company has transcended its humble beginnings to become entrenched in the global commercial landscape of industrial manufacturing.…
- 1975 Words
- 8 Pages
Powerful Essays

Read More
Better Essays
Abc Accounting
- 2592 Words
- 8 Pages
Abc Accounting

The methodology of Activity Based Costing is based on the fact that a company to produce products or services need to perform activities which consume resources, so activities are funded first and then the cost of activities are assigned to different cost objects (products, services, customer groups and regions, processes, etc) consuming such activities, in such a way we achieve a much greater accuracy in determining the costs and the correlative profitability.…
- 2592 Words
- 8 Pages
Better Essays

Read More
Powerful Essays
Homework
- 11623 Words
- 47 Pages
Homework

13-2: “Integrating Activity-Based Costing and The Theory of Constraints” by Robin Cooper and Regine Slagmulder, Management Accounting (February 1999).…
- 11623 Words
- 47 Pages
Powerful Essays

Read More
Powerful Essays
Activity-Based Costing (Abc); Hunter Company
- 1619 Words
- 7 Pages
Activity-Based Costing (Abc); Hunter Company

References: C. Argyris and R. S. Kaplan, “Implementing New Knowledge: The Case of Activity-Based Costing," Accounting Horizons (September 1994): 83-105.…
- 1619 Words
- 7 Pages
Powerful Essays

Read More
Good Essays
Activity Based Costing
- 2757 Words
- 12 Pages
Activity Based Costing

Activity based costing is a strategy used by managers to determine where to spend money. This contrasts the traditional costing system (Marx, 2009). Activity based costing provides a lot more benefits for the company and displays a more clear look at how the company is doing economically (Cooper, 1991). It allows managers to see where to spend money, and on which resources to focus their spending (Cooper, 1991). Managers should cut back spending on resources, and at the same time increase the output of their products (Cooper, 1991). There are several benefits to using the activity based costing method, and that is why it is growing in popularity. Though, in order for managers to optimize the benefits that activity based costing can provide, they will need to fully understand how it works. Activity based costing in most basic terms is spending money on specific recourses depending on the activity they serve the company economically (Cooper, 1991). This is in contrast to the standard per-unit costs. A per-unit cost is not a beneficial to know, appose to knowing how much money a specific production line would bring in per year (Cooper, 1991). Knowing how much each section brings in will allow the managers to know how…
- 2757 Words
- 12 Pages
Good Essays

Read More
Powerful Essays
Dakota Case Study
- 1366 Words
- 6 Pages
Dakota Case Study

Dakota Office Products (DOP) is a regional distributor of office supplies with several distribution centers. The company has just suffered its first loss in its history even though sales have increased. Part of the sales increases can be attributed to the new “desk top” option, which DOP delivers products to customers directly with premium markup, introducing electronic data exchange and utilizing the internet for ordering.…
- 1366 Words
- 6 Pages
Powerful Essays

Read More
Satisfactory Essays
ACC 349 Week 2 Discussion Questions
- 511 Words
- 4 Pages
ACC 349 Week 2 Discussion Questions

What is activity-based costing? What are some of the key elements of activity-based costing? How does this method differ from a more traditional costing method?…
- 511 Words
- 4 Pages
Satisfactory Essays

Read More
Powerful Essays
journal
- 2907 Words
- 11 Pages
journal

Implementation of activity based costing in Malaysia: A case study of two companiesType: Research paperAuthor(s): Jamaliah Abdul Majid, Maliah SulaimanSource: Asian Review of Accounting Volume: 16 Issue: 1 2008…
- 2907 Words
- 11 Pages
Powerful Essays

Read More
Powerful Essays
Activity Based Costing
- 3409 Words
- 30 Pages
Activity Based Costing

Chapter 4-1 Activity-Based Costing Managerial Accounting Fifth Edition Weygandt Kimmel Kieso Chapter 4-2 study objectives Chapter 4-3 1. Recognize the difference between traditional costing and activity-based costing. 2.…
- 3409 Words
- 30 Pages
Powerful Essays

Read More

Related Topics

Costs
Cost