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¶ … organization applicability Activity-Based Costing (ABC). CISCO Corporation. Identify a product service organization ABC. You technique selling administrative costs. Then identify activities ABC cost drivers activities.
Activity-Based Costing at Cisco
Cisco Systems is one of the largest global corporations. It is headquartered in San Jose, California, and it employs over 70,000 individuals. The organization manufactures consumer electronic goods, as well as other types of product and services, such as the networking or communication.
Cisco Systems is a private company, meaning that it discloses limited information to the public. The accounting information and methods it uses are as such often withheld from the public. This virtually means that the reader will not know what accounting systems the company uses. However, it is possible at this stage to suggest the usage of ABC in the management of one of their specific products -- the router.
Activity-based costing is an accounting method which assigns costs of production to the...
It is different from other accounting techniques as it differentiates between the resources consumed, rather than assigning costs equally. It as such helps in the formation of pertinent and relevant prices for the products manufactured.
At the level of the routers manufactured by Cisco, the recommendation of using the ABC technique is based on the following features:
Routers are only a small part of the products manufactured at Cisco, meaning as such that the application of ABC could stimulate efficiency within the segment
Routers could as such become better managed and their development would be supported through efficiency and realistic information
Prices would be set accordingly to the costs incurred in the creation of the routers
The development of the segment would be supported and this is essential as routers would become more popular as a means of accessing information on the internet through mobile devices.
At the level of the…
References:
Hessong, A., How to calculate the cost driver rate, eHow, http://www.ehow.com/how_6496667_calculate-cost-driver-rate.html last accessed on August 23, 2011
Wiese, N., 2009, Activity-Based-Costing, GRIN Verlag
Website of Cisco Systems, http://www.cisco.com / last accessed on August 23, 2011
Activity-Based Costing and AIS Activity-Based Costing (ABC) is an accounting method that identifies the activities a company carries out and then assigns indirect costs (overhead) to products. Activity-based costing shows the relationships between the activities, the costs, and the products, and correctly associates the lion's share of the resources used with the actual production or provision of services. The recognition of these relationships enables the indirect costs to be assigned to products in
(Questions that will assist in quantifying the relationship between resources and activities include: How much time is spent performing each activity? What equipment is used to perform activities? Do some activities have dedicated equipment? Do some activities require more space than others?) After the data on resources have been collected, establish cause-and-effect relationships between resources and activities or resources and cost objects. The third step in the process is
ABC can identify high overhead costs per unit and find ways to reduce the costs, avoid decreases in head counts due to inaccurate allocation of costs, and measure profitability with higher accuracy than traditional costing that uses direct-labor hours as the only cost driver (Activity-based costing, n.d.). Bibliography Activity-based costing (ABC). (n.d.). Retrieved Apr 2, 2009, from Managers-Net: http://www.managers-net.com/activityBC.html Activity-based costing (ABC): What is it and how can reengineering teams use it?
Activity-Based Costing in Service Industries Describe the company you researched in one to two (1-2) paragraphs. Since many traditional industries that deal with goods for sale also offer some service, it was somewhat difficult to settle on a company that dealt in services exclusively. Home Depot or another of that sort would have been easy because they offer both, but the company used for this examination was State Farm. Insurance companies will
But the customized product probably takes much more design and engineering time than the mass-produced product. Traditional costing systems would not, in most cases, pick up this difference. With traditional costing a company that makes both low and high volume products might spread all of its overhead to products it manufactures based solely on machine hours. This might misallocate overheads between products. And if one product demands a significant amount
Activity-Based Costing and Traditional Systems Activity-based costing (ABC) measures the cost of a product/service based on the activities performed to produce the product/service. Activities are processes, functions, or tasks that occur over time and have recognized results. Activities use up assigned resources to produce products and services. An ABC system first allocates indirect and support expenses to activities and processes and then to products, services and customers. Therefore, the ABC system