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Accounting and ABM: How does ABM helps uncover what causes cost.

Accounting and ABM. See attached file for full problem description.

Katherine Mitchell
Salem Enterprises

How are accountants likely to response?
How does ABM helps uncover what causes cost.
What are types and level of details required for ABC
Pitfalls or barriers for successful implementation of ABC

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How is accountants likely to response?
1. Accountant may be not like the idea of introducing the ABM or he may resist the introduction of ABM. This is because the accountant is very much focused towards the traditional costing system.

2.
a) Costs are not incurred, they are caused

The consumption of resources is what DRIVES costs. Thus organization needs to determine the actual cost associated with each product and service produced by the organization without regard to the organizational structure. Thus one has to identify discrete activities as well as identifying the primary output measure for each activity.

b) How does ABM helps uncover what causes cost.

Activity- based management can be used to identify discrete activities as well as identifying the primary output measure for each activity. With using activity-based costing there are value added-activities and non- value added-activities. Value added-activities are activities which customers are willing to pay for or show that after the process there will be a profit. Non- value activities are activities ...

Solution Summary

About two pages of discussion plus references to assist you.

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