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Assignment 2: DiscussionABC Analysis

Review the Decision Case 1 (Harris Systems) located on page 942-943 in you textbook. Answer the four case questions in the Requirements section of the case. In addition, address the following in one to two paragraphs:

• Compare and contrast ABC costing and traditional costing methods, giving examples.
• In the assigned case, which system provides a more accurate picture of the cost incurred to produce the jobs?
• Provide examples of manufacturers in your geographic area and explain which system would be best for them.

Respond to each directive or question in 12 paragraphs. Apply current APA standards for writing style to your work.

EXAMPLE PROVIDED

Compare and contrast ABC costing and traditional costing methods, giving examples.

Activity-based costing (ABC) is an accounting method that identifies the activities that a firm performs, and then assigns indirect costs to products. (Activity-Based Costing - ABC, n.d.)

Example: Management is moved to adopt ABC by the desire to improve costing accuracy to get closer to the true cost and true profitability of individual products and services, or to understand better the true costs and return on investment from projects or other initiatives. (Activity Based Costing ABC, and ABC Management Explained, n.d.)

Traditional costing assigns manufacturing overhead based on the volume of a cost driver, such as the amount of direct labor hours needed to produce an item. (Traditional Costing Vs. Activity-Based Costing, n.d.)

Example: Manufacturing organizations typically use traditional costing as a method of determining what it costs to make products. It combines an actual cost with a factor to calculate how to allocate indirect costs, called a cost driver. (Steve Lander, n.d.) The difference between ABC and the traditional method is ABC is more time consuming and the traditional method is more of an estimate.

In the assigned case, which system provides a more accurate picture of the cost incurred to produce the jobs?

Based on the assigned case, the system that provides more accuracy is the ABC method. The ABC method maybe more time consuming but like I have stated before it bring the most accuracy for a business.

Provide examples of manufacturers in your geographic area and explain which system would be best for them.

An example of a manufacture in Hawaii is the Hawaiian Isles Water Company. The reason why I chose them for the ABC method is it allows them to have the accurate information to produce the right amount of bottle water that is needed to supply their venues. Every cent wasted can add up to a larger amount if not watching closely. References

Activity Based Costing ABC, and ABC Management Explained. (n.d.). Retrieved from Business Case Analysis: https://www.business-case-analysis.com/activity-based-costing.html

Activity-Based Costing - ABC. (n.d.). Retrieved from Investopedia: http://www.investopedia.com/terms/a/abc.asp

Steve Lander, D. M. (n.d.). Example of Traditional Costing. Retrieved from Chron: http://smallbusiness.chron.com/example-traditional-costing-80441.html

Traditional Costing Vs. Activity-Based Costing. (n.d.). Retrieved from Chron: http://smallbusiness.chron.com/traditional-costing-vs-activitybased-costing-33724.html

attached is the text book pages