Use practical capacity in abc and set denominator

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Use practical capacity in ABC and set denominator value equal to practical capacity Advantages of ABC is that it uses multiple cost pools and drivers, and more accurate Disadvantages of ABC is that it requires a more detailed information system, implementing a detailed ABC system is costly and time consuming To find profit change compute allocation rate based on original product mix, compute cost driver amounts for the new product mix, multiply it by the original allocation rate Core competencies and capabilities equal key skills and expertise that give the firm a competitive advantage relative to other firms 5 forces: industry competitors, new entrants, substitute products, bargaining power of suppliers, bargaining power of customers Cost leadership: achieve lower costs than competitors Value differentiation: offer superior products or services Cost center: control costs, but not revenue or investments Profit center: controls costs and revenue, but not investment
Image of page 1

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

View Full Document Right Arrow Icon
Investment center: Controls costs, revenue and investments Payback period=initial outlay/annual cashflow 1/(1+r)=PV factor for NPV ARR=average annual income for proj. (annual cash flow-depreciation)/(average investment(beg. Book value + ending balance)/2)
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern