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extra%20credit%5B1%5D[1] - 7.37: Focus on Professional...

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7.37: Focus on Professional Competency: Research Uncertainties, research, guidelines, assumptions and choices for ABC system A. The Uncertainties are the standard deviation of a sufficiently large number of measurements of the same quantity by the same instrument or method. The inaccuracy it represents may not be in accordance to the limit of an cost or activity used. This is due to managers who are faced with uncertainties about how to be implementing an ABC system as well as how useful an ABC system will be. They face uncertainties about the costs and benefits of using ABC and ABM system. Standards evolve due to present condition, thus causing uncertainties. Due to uncertainties research comes from various sources B. Research is needed when designing an ABC system because it is important to compare different options and discover opportunities to improve cost. Under ABC, costs are trace to activities and its appropriate cost. Research is also needed to reflect the true benefit between cost and activity. There are many complications and not all activities are easily applied. For e.g., government agencies, health industries and also food industries need to have research done for the company in order to have a knowledge on 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 to overseeing ABC implementation and to allocate overhead cost, making the flow of resources more accurately reflected and the allocated costs different from the job costing
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system because more cost pools were used and each cost pool was allocated using a cost driver that better reflects the use of the resources in the activity cost pool. The team reviews and advises on implementation planning and progress and establishes performance measurement criteria and reporting requirements. The team is chosen to participate in the product line and local willingness. The team has 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. There is need for testing, implementing and comparing results between company to company, product, and departmental level. 3. A research process is not complete, even after an ABC system is implemented because error may creep into the process of tracing or allocating individual costs, leading to mismeasurement in ABC cost. Also errors are sometimes made in assigning cost directly to ABC pools. If a defect is found and trace to inspection activity, inspection activities probably increase, drawings labor resources temporarily away from other production
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