Racxel PLC is a multi-divisional organisation manufacturing four different product lines.

The directors of Racxel are worried about its costing and performance management systems which are based around absorption costing and financial ratio analysis.

Required: Draft a briefing note to the Directors of Racxel that discusses:

a. The benefits of replacing absorption costing with activity-based costing

b. The weaknesses associated with traditional, financially focused performance measurement systems like ratio analysis

c. The benefits of using the economic value added (EVA) system