Acct 300 - 7.37 A. B. 1. Research is needed when designing...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
7.37 A. B. 1. Research is needed when designing an ABC system because it is important when comparing different options and discover opportunities to improve cost. Under ABC, costs are trace to activities and its appropriate cost. Research is used to show the true benefit between cost and activity. Research is done for some companies to understand which method is best suited for the company. This will help researchers to know the appropriate uses of resources. Doing company to company research will also help in comparing result to activities using the ABC system. 2. The Use of an ABC team improves the quality of research when designing an ABC system by overseeing ABC implementation and to allocate overhead cost, it reslects resources more accurately and the allocated costs different from than job costing system because more cost pools were used and each cost pool was allocated using a cost driver. The team reviews and advises on implementation planning and progress and establishes performance measurement criteria and reporting requirements. They also have a good understanding of cost accounting fundamentals and their relevance and application to activity-based costing. This provides the necessary technical expertise to ensure the success of the research. A researcher team has found that for small manufacturing firms, simple ABC system with few activities and cost drivers are best. 3. A research process is not complete, even after an ABC system is implemented because there may be an error in the process of tracing or allocating individual costs, leading to
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
mismeasurement in ABC cost. Also errors are sometimes made in assigning cost directly to ABC pools. With mismeasurement error, allocation from the activity cost pools will not show the actual flow of resources. There will always be uncertainties and because of the complex nature, business’ dynamics evolve. Research cannot stop even after an ABC system is implement because there is need for constant evaluation. C. 1. ABM focuses on managing activities processes in order to achieve organizational objectives and Activity Based Costing is part of it. ABM reduces cost drivers and transfers resources to economic value while creating activities processes that customer wants. ABC helps to improve costing by tracing expenses to activities. Things that should be implemented are cost objects and drives, and therefore service companies and industries such as delivery processing companies, printing companies also use ABC costing. ABC also gives managers a better understanding of all transactions that occur and show realistic costs
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 8

Acct 300 - 7.37 A. B. 1. Research is needed when designing...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online