(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 to calculate activity costs. This is accomplished by assigning specific drivers to the activities based on interviews and logical associations. The forth step in the process is to identify cost objects. The next step is to how activities are related to cost objects in terms of time invested for these cost objects. The last step is to calculate cost object costs.
Traditional and Activity-Based Costing Accounting Methodologies

In the past, armed only with traditional management accounting information, managers were forced to achieve….

AC 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.).
ibliography

Activity-based costing (AC). (n.d.). Retrieved Apr 2, 2009, from Managers-Net: http://www.managers-net.com/activityC.html

Activity-based costing (AC): What is it and how can reengineering teams use it? (n.d.). Retrieved Apr 2, 2009, from PR online Learning Center: http://www.prosci.com/abc1.htm

Activity-based costing. (1997, Mar 28). Retrieved Apr 2, 2009, from DOE Directives, Regulations and Standards: http://www.directives.doe.gov/pdfs/doe/doetext/neword/430/g4301-1chp24.pdf

Activity-based costing in the information age. (2003, Jan). Retrieved Apr 2, 2009, from NET usiness Network: http://jobfunctions.bnet.com/abstract.aspx?docid=90556&tag=content;col1

Activity-based costing. (n.d.). Retrieved Apr 2, 2009, from Rockford Consulting Group: http://rockfordconsulting.com/activity-based-costing%20(AC).htm

Averkamp, H. (2009). Activity-based costing. Retrieved Apr 2, 2009, from accountingcoach.com: http://www.accountingcoach.com/online-accounting-course/35Xpg01.html

usiness definition for: AC. (n.d.). Retrieved Apr 2, 2009, from net: http://dictionary.bnet.com/definition/activity+based+costing.html

Emblemsvag, J. (2008, May 15). AC.….

ut 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 of engineering, testing and setup, but the other does not, the result will be some level of miscalculation of overheads. AC/TDAC overcomes this problem by assigning overhead on more than the one activity of machine hours. Activity-based costing recognizes that the special engineering, special testing, machine setups, and others are activities that cause costs -- they cause the company to consume resources (Accountingcoach.com, n.d., para. 2-3).

AC became popular in the early 1980s because there was dissatisfaction with traditional accounting methods.….

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 sometimes offer real products to their customers, but the main product is insurance and State Farm is recognized as the largest seller of insurance of individual automobile insurance in the United States.

The company began selling insurance in 1922 and worked primarily with homeowners in the cities and in the country. The company did work with automobile owners, but because no laws had been passed at the time to require automobile owners to have any form of insurance, it was not….

Activity-ased Costing and Traditional Systems
Activity-based costing (AC) 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 AC system first allocates indirect and support expenses to activities and processes and then to products, services and customers. Therefore, the AC system can provide a better understanding of operations and service to improve customer profitability, product profitability and process efficiency than traditional cost measurements that focus only on costs consumed by products.

There are many examples of the benefits of AC. An information technology company can use AC to understand the cost of serving an individual customer to determine the profitability of that customer. And, a company might want to use AC to determine the cost of the product based on the activities….

General & Administrative-costs cannot reasonably be associated with any particular product or service produced (overhead). These costs would remain the same no matter what output the activity produced. An example would be salaries of personnel in purchasing department, depreciation on equipment, and plant security.
In the next step the results of analyzing activities and the gathered organizational inputs and costs are brought together, which produces the total input cost for each activity. A simple formula for costs is provided - outputs consume activities that in turn have consumed costs associated with resources. This leads to a simple method to calculate total costs consumed by an activity - multiply the percent of time expended by an organizational unit, e.g., branch, division, on each activity by the total input cost for that entity. Here we are not calculating costs, just finding where they come from.

Next, the actual activity unit cost is calculated.….

Activity-Based Costing
Organizations that need help being more efficient and cost effective look to different concepts for help, one such concept is activity-based costing. Activity-based costing is used to manage an organization better and is meant to help with decision making by coming up with better information about the cost and performance of activities, resources and objects that consume resources ("Activity-based management -- an overview," 2001). This essay will discuss ABC and activity-based management as well as how ABC is different from other concepts and explain three of those concepts; lean-manufacturing, just-in-time and theory of constraints.

ABC is used by the manufacturing industries, the financial service industry, and communications and public service sectors (Blocher, 2008). Activity-based management followed activity-based costing. Taking data from ABC, it uses it to manage the products, portfolios and business processes of the organization in better ways ("Activity-based management -- an overview," 2001). There are other systems that….

ABC (Activity-Based Costing) system to assist Towels & More (T&M) management identifying the type of customer to focus out the three types of customers that the company is supplying its products. The T&M is a small and family company specializing in selling towels. The company sells its towels to three different types of stores that include Departmental Stores, Gift Shops and Specialty etailers. Based on handsome revenues that the company has recorded over the years, the Chief Executive Officer (CEO) decides to expand the business. However, the small gift shops deliver the highest contribution margin, and the CEO is convinced that the gift shops are the appropriate retail outlets to pursue. The paper calculates the distribution costs and customer support assigned to the T&M's three types of customers to assist in the evaluation of the ABC technique for a customer selection.
Cost Allocation for the Three Categories of Customers

The cost….

Activity-ased Costing in a Service-ased Organization
Activity-ased Costing operates on the conventional approach and applies a two-stage allocation instruction and other cost drivers. First, the system identifies the important activities and overhead costs assigned to each activity in proportion to the resources used. Consequently, for each of these cost pools, cost drivers are identified. Secondly, the assumed overhead cost driver is assigned proportionally to the final outputs of the cost pool. The most important aspect of a proper AC design system is that activities and resources are assigned to cost items based on their use.

In service-based organizations, the AC system must show the actual physical structure of resources and activities and cost items. It is necessary to undertake a precisely executed, correct analysis of operations rather than of the cost figures in the general ledger. Therefore, design is everything in an AC system because each organization uses different levels of….

Many organizations have sufficient control over their cost drivers, specifically those that work with activity-based costing; these companies can locate a sufficient amount of cost information within the company to accomplish these analyses in a timely fashion (Chatzkel, 2003). In reality, though, ABC systems are typically structurally complex and, in spite of the need for complete integration of such ABC systems, many such systems remain as stand-alone analysis tools which generally begin with resource-based, rather than activity-based, data fed from the general ledger system (Platt & Towry, 2001).
In their case study of a hypothetical bank, "Activity-Based Costing in the Service Sector: The Buckeye National Bank," Bamber and Hughes (2001) report that, "Banks, like other businesses, are under attack from all sides. Brokerage firms and mutual-fund empires in particular are trying to grab traditional bank customers, and highly profitable ones are the most attractive. To fend off the assault, banks….

Cost AccountingA. The allocation system might not be accurate, because it allocates based on the number of units produced. However, it does not take into account the time it takes to produce an individual unit. The overhead costs would be more accurate if they reflected not just the number of units, but the time taken to produce each unit. If the Ogunquit takes up more than 12% of the total production time for the company, then the current system undervalues it from an overhead allocation perspective. Last year, the allocation wasUnits% total UnitsOverhead AllocationGoose Rocks5029.41%1350000Kennebunkport10058.82%2700000Ogunquit2011.76%540000B. By direct labor hours, the overhead allocation would look much different:Direct Labor%DLOverhead AllocationGoose Rocks100014.81%680,000Kennebunkport100014.81%680,000Ogunquit475070.37%3,230,000total6750C. The use of more than one cost pool would improve the overhead allocation because it would better reflect the way that resources are used in the production of each boat. Using one cost pool places the entire emphasis on just that….

Finance
Activity-Based Costing at Super Bakery

The management at Super Bakery has developed a very lean business model which is an efficient use of capital. The model is based on the concept of a virtual organization. In this business model the firm owns very few assets that are required for production; by outsourcing to third parties the firm does not need to make the investments that are traditionally associated with production companies. Furthermore, as Super Bakery does not run the facilities there are fewer considerations for ongoing operations. The virtual organization strategy is very effective and leaves the firm in a position which facilitates flexibility and has helped with the firms' ability to increase capacity, which has averaged 20% a year. If the firm had been a traditional organization with its own assets, increasing capacity may have been more difficult and required further investment. The firm has been successful; to remain successful….

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….

Therefore, although executive salaries and other similar costs are difficult to assign, a method must be developed for doing so, if the accounting is to be the most effective. One method might be to divide the executive salaries by the average number of patients seen in the facility over the year, or some similar method. This is only one example of how an indirect expense can become a direct expense using ABC methodology.
The purpose of ABC is to serve as a tool for management. If management can see how each unit affects the cost structure, then they can spot areas that are more or less efficient. There are more limitations in managerial abilities to do this in the healthcare industry than in other areas of the economy. This is largely due to the limits imposed by maintaining patient safety. However, cost accounting can still provide an effective means to….

Accounting
ABC at Netflix

To; CEO Netflix

From; XXXX

Re; Move to Activity-Based Costing (ABC)

Activity-based costing has the potential to increase transparency in accounts, compared to absorption costing. Activity-based costing breaks down of the different tasks into the different elements, determining the costs of each activity to create a product or service. This breakdown of costs can them be used to allocate costs for the production process and give an accurate picture of the costs associated with producing each item or serving each customer (Innes & Mitchell, 1998).

Variable costs are easy to allocate to the different products or customers, the greatest value from activity-based costing is the way that fixed, or indirect costs, can be assessed and allocated based on the actual usage. Netflix may benefit from this approach due to the high level of fixed costs and low level of variable costs that are associated with providing the media streaming services. The ability….

Management accounting combines traditional accounting responsibilities with management responsibilities, which allows a company to align budgetary considerations with the people handling the money.  There are a variety of different topics in management accounting that could serve as a good springboard for research, because how it is applied can vary tremendously depending on the size, purpose, and structure of an organization.  Regardless of the approach, it is clear that management accounting has become an important component of the decision-making process in business of all sizes and that the continued evolution of this practice should results in....