Facebook Pixel Code

Activity Based Costing and Activity Based Management

This is a preview of the 7-page document
Read full text

Based on traditional costing system analysis, the managers would be encouraged to stimulate Helios sales and introduce other custom new products, and to see as result profitability of the Widgets sinking again. ABC profitability analysis, on the other hand, tells that Widgets continues to be the division’ s “ cash cow” and calls for a careful examination of the new products’ manufacturing processes before introduction. It also encourages critically assessing Helios production process and selling price to determine what the way to increase the product’ s profitability is: to eliminate some of the non-value-adding activities, to increase the selling price and marketing support or whether to phase out the product is the best solution. The analysis enabled Bingley Products managers to see that “ not all revenue is good revenue” , now it should be determined whether “ not all customers are profitable customers” (Kaplan and Anderson, 2004, p. 138). For instance, in the case of Helios processing of customer orders makes up a significant part of the total cost with 16,000 of customer orders and £ 78,000 overhead.

The customer structure should be analyzed to identify the profitability of a particular group of customers and introduce their segmentation, for example, “ value-adders, straight-liners, and value-killers” with the further managerial decision to be taken (increase in minimal order amount, refusal to work with small customers, etc. ).It should also be considered to implement at Brixton Industries time-driven ABC which provides a more flexible cost model.

“ In the revised approach, managers directly estimate the resource demands imposed by each transaction, product, or customer rather than assign resource cost first to activities and then to products or customers. ” (Kaplan and Anderson, 2004, p. 133) The Time-driven ABC has several advantages: it is very flexible, captures the complexity of the modern manufacturing operations and can easily accommodate the change in the processes, efficiency or products; it requires less time and effort for the large scale implementation and, in addition, accounts for unused capacity.

This is a preview of the 7-page document
Open full text

Related Topics

Close ✕
Tracy Smith Editor&Proofreader
Expert in: Management, E-Commerce, Human Resources
Hire an Editor
Matt Hamilton Writer
Expert in: Management, Macro & Microeconomics, Marketing
Hire a Writer
preview essay on Activity Based Costing and Activity Based Management
x
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
WE CAN HELP TO FIND AN ESSAYDidn't find an essay?

Please type your essay title, choose your document type, enter your email and we send you essay samples

Contact Us