Is Abc Suitable For Your Company?

1411 words - 6 pages

Is ABC suitable for your company?--Using Estrin, Kantor and Albers' contingency grid,If an organization's score puts it in Quadrant three,Is ABC implementation recommended?Explain. Is their method "foolproof?"AbstractNowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The second one that how does management use ABC information in decisions, which consists of weighting and combining the weights of the ten factors and to evaluate implementing ABC. ABC analysis along two separate dimensions, and there are ten mediating factors can guide management in determining the answers. The first five factors based on the probability, the second dimension of the model seeks to establish decisions. Finally an impartial analysis of ABC operations can tell you yes or no that using contingency analysis model. Interpreting the results: Quadrant 1(both X and Y are positive): it is recommended to use ABC. Quadrant 2 (X-positive, Y-negative): ABC is not recommended.Quadrant 3 (both X and Y are negative): ABC is not recommended. Quadrant 4 (X-negative, Y-positive) It is possible to implement ABC in long-term. The ten factors discussed above are based on the condition that ABC method is better than traditional method. So it is unfair to traditional one. The management should consider the reality to decide to use the ABC.Is ABC suitable for your company?--Using Estrin, Kantor and Albers' contingency grid,If an organization's score puts it in Quadrant three,Is ABC implementation recommended?Explain. Is their method "foolproof?"Many companies are switching to activity-based costing (ABC). ABC is just a new way of allocating overhead costs. ABC that it is not the making of products that directly affects costs. Activities directly affect costs. As activities are created or changed, costs are created or changed. So, Activity-based costing systems focus on activities rather than products, which helps to prevent the distorted product costs that can arise from the use of traditional cost systems based on volume. We know, ABC is a relatively new and very important topic in managerial accounting. It allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. ABC information that results is more accurate and more useful for decision-making. Managers can see the strategic importance of having highly accurate product cost information. Potential Advantages of ABC versus traditional costing methods Ttraditional costing methods...

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