Benefits of Activity Based Costing, ABC

Benefits of Activity Based Costing, ABC Activity Based Costing (ABC) is an accounting method that assigns costs to activities according to their use of resources, rather than products or services. This enables resources and other related costs to be more accurately attributed to the products and the services which they use. It does not change or eliminate any costs, in the other way; it provides detailed information on how costs are consumed. The main benefits of Activity Based Costing are providing understanding into the fastest growing and least visible element of cost-overhead. We can also improve profitability by monitoring total life-cycle cost and performance so that we can improve the effectiveness of budgeting by identifying the cost of different service levels. In addition, ABC costing does encourage continuous improvement and total quality control because control and planning are directed at the process level and it links the corporate strategy to operational decision making. By using ABC costing, we can also eli minate waste by providing visibility of non-value added activities. Besides that, ABC costing help to improve make or buy, estimating, and pricing decisions which based on product cost that reflects the manufacturing process. Although there are many benefits of ABC costing, there are also a few limitations. (J. Antos) Limitations of Activity based Costing There are a few limitation of using ABC costing. First, we may consuming more time to collect data for example data concerning numerous activity, collecting data, checking data, and entering them into the system. Besides that, once implemented, the activity-based coting is costly to maintain for example the cost of buying, implementing, and maintaining activity-based system. This system may make waste visible which some executives and managers do not want their boss to see because it may be difficult to set up and establish, particularly if that organization is using more traditional accounting method. Furthermore, it can be time consuming if all activities are to be costed and also it may provide too much details which obscuring the bigger picture. Activity-based costing data can easily be misunderstood so it must be used carefully especially when it is used for decision making. Before making any significant decisions using activity-based costing data, managers must recognize the co sts which are really relevant for the decision at hand. (Ray H. Garrison, 2008) Value-Added versus Non-value-Added Activities Every organization requires information to allocate resources, monitor the actions taken, set priority and make decisions. Activity-base costing provides the accurate cost information by allocating overhead costs. However, activity-based management is focusing on enhance the use of ABC from product costing to a comprehensive management tool that concentrate on decreasing the costs and concurrently improving processes and decision making. After that, a refinement of ABC used in activity based management is the classification of activities to value-added and non-value-added. A non-value-added activity can de defined as the production or service related activities that can be eliminated with no deterioration of product attributes ( Miller, 1992). Non-value-added activities are activities that simply add cost to or increase the time spent on a product without increasing the market value of the products. Activities such as the storage of inventory, building maintenance; inspection and inv entory control are examples of non-value-added activities in manufacturing companies. Examples of non-value-added activities in service industry consist of bookkeeping, billing, traveling, advertising, cleaning, taking appointment, reception and etcetera. According to David and Robert (1995), making non-value-added activities visible is one of the advantage of activity based management but it is the most difficult to achieve. Value-added activities are activities that increase the worth or market value of a product or service to customers. For instance, activities like engineering design, machining, packaging, performing surgery, providing legal research for legal services and etcetera are categorized as value-added activities. When people understand and accept the reasons why an activity is classified as non-value added or value added then the clarity and understanding between value-added and non-value-added activities are achieved (Miller,1996). Cost Hierarchy In Activity-Based Costing A cost hierarchy classifies costs into different cost pools on the basis of different type of cost driver or cost allocation bases or different degrees of difficulty in identifying cause-and-effect or benefits-received relationships(Horngren et al. p 142, 1999). There are four levels to identify cost allocation bases or cost drivers, the classification is shown as follow: Unit-level activities: these activities can be defined as resources sacrificed on activities performed on each individual unit of a product or service (Horngren et al, 1999). For instance, manufacturing operating costs such as energy and repair which have relationship with the activity of running a machine are unit-level activities. Batch-level activities: Activities performed for a group of product units or services rather than to each individual unit of product or service (Horngren et al, 1999). Examples of batch-level cost in manufacturing are setup cost and procurement costs. Then, the number of setups or setup time is examples of cost drivers in batch-level activities. Product-sustaining activities: These activities are defined as resources sacrificed on activities that performed in support of an entire product line, but not performed every time when a new batch or unit of products is produced (Horngren et al.,1999). Design costs and engineering costs are examples of product-sustaining activities in manufacturing industry. Facility-level activities: Activities required to support or sustain the organization as a whole and cannot be traced to individual product (Horngren et al, 1999). The example of this activity includes home office general administration costs. In fact, the successful classification of these activities provide managers a structured way of thinking about the relationships between activities and the resources they consume. Activity Based Costing for Service Industries and Small Business It is widely known that activity based costing has been used by most of the large corporation such as manufacturers. In fact, activity based costing has been widely implemented by small business and service industries such as banks, airlines, hotels, hospitals, insurance companies, financial services firms, accounting firm, railroads and etcetera. However, activity based costing has seemed to be more successful when implemented in large corporation rather than using in small business. According to Henrick noted, he mentioned that companies with not so much products and markets are not seemed to get as much advantages from basing costs on activities as companies operating with diverse products, service lines, channels and customers. Actually the primary objective of activity based costing in small industry is no different with manufacturing company. The objective is to figure out the key activities that generate costs and to record how many of those activities are performed for each service provided. Then, managers are able to generate data to provide better budget and concurrently the expenses of a company are known better. The prevalent approach to identify activities, activity cost pools, and cost drivers is the same for manufacturing company and service companies. In addition, the classifying of activities as value-added and non-value added, and the effort to decrease or eliminate non-value added activities are used in service industries too. Since service industries and manufacturer companies are using the same objective of activity based costing, then why sometimes it is difficult in adopting activity-based costing in service industries? The difficulty of implementing activity-based costing in service comp anies is that a larger proportion of overhead costs are company-wide costs that cannot be directly traced to specific services provided by the company. (Weygant.) Besides that, many of the expenses in service industries are caused by product (services) such as savings account and home mortgage. However, many expenses for service functions are caused by demands by individual customers rather than service demands. Thus, customer behavior which is the feature distinguishing these systems from activity based costing as used in manufacturing companies has to be taken into account when implementing ABC system in services industries( Cooper and Kaplan, p. 467, 1991). Service companies offer differentiate services in order to satisfy customer needs. Each service, with its characteristics, makes different demands on the organizations resources. Thus, service companies have to improve their service quality and the variety in service line. Concurrently, service companies have to focus on customer economics far more than manufacturing companies. The cost of marketing, selling, delivery and serving of the products might be customer specific in manufacturin g companies. In contrast, for service companies, even the basic operating costs of standard service are determined by customer behavior (Cooper and Kaplan, pp234-235, 1998). Therefore, a fine ABC system for Service Company will provide the information for the measurement of costs and profitability at the customer segment level and market level. Since small business and large companies are using the same objective of activity based costing, then why does small business get less benefit from using activity based costing compare with large corporation? In fact, lack of knowledge and technical people in adopting the activity based costing system in small business may lead to unsuccessful of using this system in small business. Moreover, activity based costing software is expensive.   Most ABC practitioners find that special-purpose ABC software is required to make the task manageable. At $6,000 and up for one package sold by ABC Technologies, software can add significantly to outlays for this type of accounting technique ( Mark Henricks, 1999). So, small business considers using ABC is wasting of money due to not so much profits and products differentiation for their products. Thus, they omit using ABC. Developing Of New Approach to ABC Activity-based Costing system used in large corporation and service industries for the current grouping of costs and analysis of profitability of product (service) tend to be complex, costly and hard to adjust to quickly changing business environment. For example, ABC system used in several years ago in large financial service firm required seven hundred employees at more than one hundred facilities to submit monthly survey of their time. Thus the company employed 14 full time people just to collect and process the data and concurrently prepare management reports which took more than thirty days to prepare (Kaplan Anderson, p 3, 2007). Some employees questioned the accuracy of product and activity cost calculations due to long time to prepare reports and complexity of ABC system. As a result, operation, marketing and sales managers spent time to argue the correctness and accuracy of calculations instead of making decisions improving effectiveness of processes, profitability of produ cts and customers and capacity utilization. Therefore, Kaplan and Anderson developed new formulae of activity-based costing namely Time-Driven Activity Based Costing (TDABC). It was designed to eliminate the problems in ABC system implementation and operation in large entities. Thus, Kaplan and Anderson who was the author of the new formulae identified the following problems with conventional ABC model: ( Kaplan Anderson, p 7, 2007) à ¢Ã¢â€š ¬Ã‚ ¢ It was costly and long time had to be taken for interviewing and surveying process. à ¢Ã¢â€š ¬Ã‚ ¢ Data for the ABC models were subjective and hard to validate. à ¢Ã¢â€š ¬Ã‚ ¢ It was expensive to store, process and report the data. à ¢Ã¢â€š ¬Ã‚ ¢ Most of the ABC model were local and did not provide an integrated view of company-wide integrated profitability opportunity. à ¢Ã¢â€š ¬Ã‚ ¢ The ABC model could not be easily uploaded in order to accommodate the quickly change of business environment. à ¢Ã¢â€š ¬Ã‚ ¢ The model was incorrect when it ignored potential for unused capacity. Conclusion A Traditional Costing System is an accounting system that assigns overhead to products on the basis of predetermined plant wide volume of unit based output rates such as machine hour and direct labor. (Jerry J. Weygandt., Donald E. Kieso., Paul D.Kimmel., 2002) In contra, ABC system is using the different way to identify activity cost pool by allocating overhead, after that, the costs are assigned to products using related cost drivers that measure the activity consumed. ABC system bring a few benefits for managers in a company which provide more accurate product costs, better cost control and better data for decision making .(Ray H. Garrison., Eric W. Noreen., 1997) However, this system also has several limitation which is the difficulty involved in gathering data relating to cost drivers and activities centers. Although there are a few limitations, ABC system is a useful accounting system under certain conditions and it is a suitable costing system to use. The redesign and setting up a new costing system is a very important decision to a company because these require substantial cost and much more effort to achieve. Therefore, managers should be very careful when implementing new changes in costing system. (Jerry J. Weygandt., Donald E. Kieso., Paul D.Kimmel., 2002)

Acid Precipitation Essay -- essays research papers

  Ã‚  Ã‚  Ã‚  Ã‚   Sitting in your room late at night, you listen to the gentle pittter-patter of the rain on your window. Ahh, so soothing and relaxing. Have you ever really wondered what the rain is really made of? Is that just water or is it acid slowly streaming down out there? That rain you hear just might be acid rain, it could change the way you live your life.   Ã‚  Ã‚  Ã‚  Ã‚  The commonly used terms â€Å"acid rain† and â€Å"acid precipitation† describe specific forms of a type of pollution described generally as â€Å"acid deposition.† Harmful gases that rise into the air mix with cloud moisture, sunlight, and oxidants. There they chemically combine into dilute sulfuric and nitric acids, which fall back to the earth. This is acid deposition. The major contributing pollutants are sulfur dioxide and nitrogen oxide (Morgan, 5). â€Å"Acid rain† is basically rainwater with a pH level lower than 5.6 (Morgan, 3). The term pH means â€Å"potential hydrogen†. When a substance has a pH level of 7, it is completely neutral with the same number of hydroxyl and hydrogen ions (Pringle, 6). Acidity in the atmosphere can be changed by many natural things. When a volcano erupts, sulfur dioxide is spewed out. Droughts produce unusually dry soil conditions allowing dust particles to be carried upward into the air, neutralizing the acids that may be present at the time (Pringle, 4). Acid Rain can come in concentrations sometimes more acidic than lemon juice. These pollutants reach the earth in rain, snow, hail, sleet, or fog. The rain at the beginning of a shower is usually more acidic than the rain that follows. Dry acidic particles can also fall from the atmosphere. Because wind can carry gases and moisture for hundreds of miles, even areas far away from the source bear the effects of acid deposition (Durha m, 10). There are of course, many things that we as humans do everyday to promote and support the continuation of acid rain. Not intentionally, of course. When the fossil fuel, (i.e. coal) is used, the sulfur in it mixes with Oxygen in the air to form sulfur dioxide. The sulfur dioxide is eventually turned into acid over a matter of days. Coal-fired power plants are the single greatest cause of acid rain in the United States. They account for two-thirds of all sulfur dioxide emissions in the US (Pringle 16; Morgan 75). In the mid-1980’s, the United states alon... ...ain can aggravate a person's ability to breathe and may increase disease, which could lead to death (Bennet) In conclusion, any rain with a pH level lower than 5.6 are classified as acid rain. Acid rain is made when sulfur dioxides mix with nitrogen oxides to form acids. The acids then can come back down out of the atmosphere in either a dry or a wet form. Both of these have proven devastating to both aquatic animals and forests. Billions of dollars have been spent to correct and try to fix what acid rain had done to buildings and monuments. Acid rain also has its toll on the health of us humans. The food you eat could be contaminated with toxins due to acid rain, you’d never know it either. Sources: Bennet, Mark. â€Å"Acid Rain† 2-25-00. Online. Internet. 1-17-96 Available WWW: http://www.soton.ac.uk/~engenvir/enviroment/air/acid.home.html Durham, Jack. Acid Rain: A Student’s First Sourcebook. Diane Publishing Co.: 1994. Morgan, Sally. Acid Rain. Franklin Watts, Incorporated 1999. Phamornsuwana, Sam. â€Å"Effects of Acid Rain† 2-24-00. Online. Internet. 1-5-99 Available WWW: http://www.epa.gov/acidrain/effects.html Pringle, Laurence. Rain of Troubles. Macmillan Publishing Co.: 1988.

Jane Goodall Research Paper

Jane Goodall Jane Goodall once said, â€Å"I wanted to talk to the animals like Dr. Doolittle. † Obviously you can tell from this quote that Jane Goodall was very passionate about animals. She was an ethologist, which is a person who studies the behavior of animals, and more specifically a primatologist. She studied chimpanzees in Africa and made ground breaking discoveries about the similarities between primates and humans. So in a nutshell, the research of Jane Goodall was revolutionary and it changed the way that we view ourselves.Before she was conducting powerful research in Africa, she started out as a normal child. She was born on April 3, 1934, in London, England. She had always loved animals and this was easily seen when at the age of 4 she slept with earthworms in her bed and stayed in a hen house for 5 hours to see her hen lay an egg. See loved all animals but her infatuation with primates stemmed from receiving a stuffed chimpanzee which she named Jubilee, at the a ge of 2. This was from Current Biography. Jane had always dreamed of going to Africa to be among nature but it took her several years to make it there.Finally, one of her friends invited her to her family’s farm in Kenya. She finally got to Africa in 1957 at the age of 23. Jane greatly enjoyed being in Africa and once there she was determined to find the paleontologist, Louis Leakey. She was able to meet him and when she did she found out he was doing a study on apes. He ended up letting her be the main field worker. The scientific community thought that it was crazy to let a woman with no science education run a study. Leakey was aware of these conceptions but didn’t pay them any mind.So in the year 1960, Jane set off for Gombe, Africa to begin researching. Just before Goodall was getting ready to start the study, many researchers discouraged her, telling her that she would never get close to the chimps and it would be a waste of time. Jane didn’t head any of t his advice. She knew that she was going to this study her way and that she would be successful. The first two months were a little disappointing for Jane. She would walk through the underbrush and only be able to hear the chimps screeching from high above and rarely, even catch a glimpse of a chimp.When she thought that everything was going terribly, she found a place she called, the â€Å"peak. † The peak was a clearing about 100 ft. above the jungle floor. Jane could sit there and observe the chimps’ natural behavior. It was here where Jane started gathering her first observations. She saw the chimps greet one another with hugs and kisses and walk hand in hand. Once she even witnessed a male take a female’s hand and gently kiss it. Jane was able to conclude from these first few observations that chimps are very social creatures like us.In no time at all, Jane had made a discovery that shocked the science world. She had observed chimps on several occasions stra tegically, hunt down and kill other animals. Until then it was believed that chimpanzees were herbivores. Another ground breaking discovery that Goodall made around that same time was that chimps made tools to help them do things. According to PBS, she saw a chimp pick out a grass stem, whittle it with his teeth, and use it as a sort of fishing pole to scrape insects out of the ground.No one had ever recorded seeing any creature other than a human create a tool. This made people rethink the definition of a human. Even though Goodall was making discoveries, she still wasn’t pleased with the fact that she wasn’t able to get close to any chimps yet. Her new focus was to do just that. She would sit on the forest floor and watch as the chimps walked by. Eventually they warmed up to her and came closer. Suddenly the chimps were aggressive toward her but after a few weeks it stopped and the chimps let her follow them while hunting for food.Soon she was even able to start inte racting with them a little. She had a special connection with a chimp she named David Grey Beard. He was the first chimp she actually made physical contact with. Many of Jane’s peers didn’t like her because she named her subjects, and told stories about them instead of recording data. A lot of them didn’t trust the authenticity of her discoveries. Jane disregarded all of this negativity. She called herself an â€Å"old fashioned naturalist. † In fact she said she would have stopped if she had had to things the official way.In the end, Goodall’s discoveries were validated and some of her research techniques have been adopted by the scientific community. So in conclusion, the research of Jane Goodall was revolutionary and it changed the way that we view ourselves. She discovered that chimps were omnivores ancd used tools; are social creatures just like humans; and was able to have contact with a wild chimp which no one else had done. So after hearing about Jane Goodall can you say that you are that much different than a chimp?

Italian Verb Conjugations Tagliare