Activity Cost Base

Costing week 9

Conventional vs abc costing

Conventional costing | Abc costing |

| Lots of overhead suitable method to choose a suitable method for choosing abc |

Abc

Benefits | Limitations |

More accurate method of costing | Costly ComplexMay not be easily understoodDrover need to reviewedNot always easy to identifyImplement abm – our justification is because it is incremental improvement vs bpr |

Could ask to calculate cost per unit of activity driver ( show working to get to calculations)

Potential suggestions

Focus more on whole sale distributers ( especially in terms of shipments because it is much more cost efficient to sell in bulk to distributors instead of small amount to retail stores

Just in time system good

Diversify more suppliers

Competitors ( price taker)

High competition in pumps – decrease prices and therefore increase market share

I think you could be asked to recalculate abc costing to see how they got there

also jit costing .. is a major point and maybe advantage disadvantages

maybe a question on abc costing vs conventional

for customers ... maybe try and get more customers for values

and diversifications of suppliers and

improve relationship with suppliers to ensure that they are reliable and make sure that contract stuff is enforced

they might ask us to reprice and discuss pumps and flow ... stuff

Only turns on the machine once ... for the values “all monthly production of values took place in single production run while was immediately shipped o single customer upon completion” maybe could turn on twice seems to be machine isn’t being used effectively

Customers

* Understand customers and value for products and what they were filling to do ( how much do they value our products and how much are they willing to pay) specifically with the flow controller how much is the maximum they are willing to pay for it

* Get more customer for values –since we currently only have single customer and if...