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value added activities; activity based costing

(a) What are some methods a business uses to determine if the activity is value added or not?

(b) How do you think business learn from customers (consumers) what is value added and what is not value added?

(c) Cost pools provide more accurate cost allocation. If this method is more accurate why doesn't everyone use the ABC costing method?

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(a) What are some methods a business uses to determine if the activity is value added or not?

The key distinction in the difference between a non-value added activity and a value-added activity is determining which activities consume resources but do not add value to the business's product or service. Those that add no value and are a drain on resources are not value-added, and those that drain resources but do add something to the product or service are value-added. The main method is therefore for the company to analyze each activity and to determine exactly how much the activity adds to the basic product or service. A second method is to determine how much waste is created from the activity. Management oftentimes uses waste as a gauge of ...

Solution Summary

The solution provides a detailed discussion for each question presented involving value added activities and cost pools with the use of ABC costing methods.

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