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Case 2 Activity - Based Costing

Case 2 Activity - Based Costing - An activity based costing...

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An activity based costing system is more appropriate for Wall Décor because their product lines differ greatly in volume and manufacturing complexity, and the product lines are numerous and diverse and require differing degrees of support services. First, management has noticed a significant difference in sales performance of the unframed and framed prints. It is difficult to sale the unframed prints at a competitive price in the malls. The stores profits on unframed prints are very low because the cost for unframed prints charged by Wall Décor to the Greetings stores is priced slightly below what the competition is charging their customers for unframed prints. In spite of the large volume of unframed prints, the profit margin remains low and the overall profit earned is small. Secondly, because of the several options of prints offered, Wall Décor has two separate teams of IT professionals. One team is dedicated to framing and matting materials. It requires highly skilled professionals to accurately scan and upload a print to the site so that it represents what the final print will resemble. The other IT team is dedicated to optimizing the performance of the website.
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