Purchase Solution

Airtran Airways - Activity Based Costing

Not what you're looking for?

Ask Custom Question

Identify a product or service in AirTran that could use ABC. Then identify at least two activities for ABC and the appropriate cost drivers for those activities. Estimate the application rates for each cost driver.

If you cannot identify specific actual amounts, make a reasonable estimate and apply the tool as if the data were factual.

Your report should include:
- The name and nature of the organization
- The activity and time period you used
- The inputs you used
- Your results
- Any implications from your results

Reference:
www.airtran.com

Purchase this Solution

Solution Summary

This solution discusses activity based costing in an airline organization.

Solution Preview

Activity-Based Costing (ABC) is an accounting technique that allows an organization to determine the actual costs associated with each product and service produced by the organization without regard to the organizational structure. Activity- based costing 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 which customers are not willing to pay for or activities that do not show future profit. The activities must be analyzed in order to decide what will be a productive measure. When using activity-based costing an organization can measure costs against individual activities. With seeing what the results are, the company can figure out if there can be an adjustment made to create a value added-activity. If the activity turns out to be a non-value added-activity the organization may decide to delete the activity all together.

Activity-Based Costing is a more accurate cost management methodology. ABC will allow us to focus on indirect costs, including our overhead. We can trace our expense category to a particular cost object rather than to allocate it. Using this process will also help us make indirect expenses direct. Activity-Based Costing is a costing model that identifies the cost pools, or activity ...

Purchase this Solution


Free BrainMass Quizzes
Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.