ACC221 - Cast Study Assessment (20%) April 2022 Ripken Products: A Case for Learning Activity-Based Costing (ABC) Learning Objectives: This case enables students to learn the following points: Traditional absorption costing can trigger dysfunctional decisions. ABC is a costing system that assigns costs to products (or other cost objects) based on traceable consumption of resources. ABC provides new insights regarding product costs and product profitability. ABC cost assignment is an improvement on traditional costing that arbitrarily allocates overhead costs to products. ABC challenges conventional wisdom that manufacturing overhead costs are always "indirect" costs. They will learn methods of calculating ABC costs. CASE SCENARIO: RIPKEN PRODUCTS "For years, I have been telling you that your cost accounting system is broken. I have had it with your numbers, Ed. I never trusted them. You will be sorry that you made this decision, Paul. Now I must get back to my people on the plant floor." With these words, Production V.P., Rick Dempsey stormed out of the weekly Thursday meeting of the Ripken Products senior management team. At the meeting, owner and CEO Paul Richards announced the decision to eliminate the Delete product from the company's product line. Since its founding six years earlier, Ripken Products manufactured all of its four products in its Towson, Maryland plant. After assessing profitability of each product based upon the analysis prepared by company controller, Ed Murray, Richards decided to eliminate its Delete product two days earlier. He announced his decision at the meeting with the company's five senior managers: Ed Murray, Controller Rick Dempsey, VP of Production L. Rod Hendricks, VP of Marketing Jim Palmer, VP of Human Resources Ruth George, Sales Manager Page 1 of 5