Marlene Baer, the accountant of Breeden Security USA, recognizes that grouping all manufacturing overhead costs collectively and allocating them to the two products of Breeden is not really precise. She groups allocates them to the two products and costs by task. The system resembles a simple task-based costing system. It introduces the definition of actions, computing merchandise price based on their use of the tasks, and costing those activities. The amended product costs are significantly different, and examining what causes the differences is significant for discovering where ABC can supply valuable advice.
Baer defines a fresh activity (order management),) computes the price per order, and begins to revise the information on merchandise profitability and to develop data on customer profitability. Having discovered the high cost of managing each order, she has good reason-based notion of customer profitability and management making that process more efficient, and perhaps more customer friendly. The chief dilemmas of the two cases are as follows: In the A case (UV1778), the firm uses a traditional costing system. The primary questions relate to breakeven the effect of stock build-up and analysis on gain. The B case introduces the use of an activity-based costing system to allocate costs so that product and customer profitability can be assessed by the firm. Both cases can be used in two categories or together in one category.
PUBLICATION DATE: June 16, 2009 PRODUCT #: UV1779-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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