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activity based costing (ABC), JIT, quality, lean manufacture

This case has two separate parts.

Part I:

How can activity based management and activity based costing (ABC) benefit an organization? Specifically, address the following points.

How does ABC differ from other allocation methods?
Describe the main characteristics of ABC.
What type of companies tends to benefit from ABC?
Comment on a company (research Internet) that has implemented ABC.
What type of company is it?
Was it successful?

Part II:

The below concepts are all applied by many business in an attempt to be more efficient and reduce costs. Create a table describing at least three of the concepts below and how implementation may benefit an organization.

Lean manufacturing
Just-in-time
Theory of constraints
Total quality control
Value chain

Solution Preview

Part I

Activity based management and activity based costing is different from a more traditional costing method because it uses multiple cost drivers and multiple overhead pools to allocate or apply overhead to products and cost objects.

The main characteristics of ABC and ABM is that the charge the division or products for use of overhead resources consumed by charging for activities that are thought to drive costs. The goal is to create awareness that activities drain resources and have the products that use the resources have the costs mapped to their product or division. In this way the divisions and products that use the most resources are charged for those resources. Traditional allocations with one resources to spread overhead often charges products an "average rate" and so fussy and difficult products get a break (charged less than they consume or "under costed") and easy low-hassle products look worse than they are (charged more then they consumer or "over costed").

Companies that benefit from ABC are those that have significant levels of variable overhead and those with products that use disproportionate share of overhead resources. Companies ...

Solution Summary

Your tutorial is 675 words plus four references. The tutorial discusses activity based costing, what it is, how it impacts organizations, and how a particular implementation impacted a service organization.

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