Scribd Logo
Upload

Welcome to Scribd!

  • 23 views

    Ma Abcl

    Uploaded by

    shammee
    Using activity-based costing provides several benefits to Walton Company over traditional costing methods. It provides more accurate production costs for specific items by tracing indirect costs to cost objects. It also allows for assigning specific overhead costs to more expensive products. Managers can evaluate production efficiency and identify areas for improvement. Overall, activity-based costing results in more accurate cost and profit margin data, enabling better decision making.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Ma Abcl

    Uploaded by

    shammee
    23 views2 pages
    Using activity-based costing provides several benefits to Walton Company over traditional costing methods. It provides more accurate production costs for specific items by tracing indirect costs to cost objects. It also allows for assigning specific overhead costs to more expensive products. Managers can evaluate production efficiency and identify areas for improvement. Overall, activity-based costing results in more accurate cost and profit margin data, enabling better decision making.

    Original Title

    MA-ABCL

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Using activity-based costing provides several benefits to Walton Company over traditional costing methods. It provides more accurate production costs for specific items by tracing indirect costs to cost objects. It also allows for assigning specific overhead costs to more expensive products. Managers can evaluate production efficiency and identify areas for improvement. Overall, activity-based costing results in more accurate cost and profit margin data, enabling better decision making.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    Ma Abcl

    Uploaded by

    shammee
    Using activity-based costing provides several benefits to Walton Company over traditional costing methods. It provides more accurate production costs for specific items by tracing indirect costs to cost objects. It also allows for assigning specific overhead costs to more expensive products. Managers can evaluate production efficiency and identify areas for improvement. Overall, activity-based costing results in more accurate cost and profit margin data, enabling better decision making.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Benefits that getting WALTON Company by following Activity-Based Costing

    Method
    Reducing overhead costs and maximizing profits play an important part for business success. For
    this a business organization need to account for all direct and indirect costs, Activity-based
    costing (ABC) offers a number of benefits when compared to other accounting methods.

    There are several benefits to using activity-based costing, such as:

     Realistic and more accurate production cost of specific items

    Activity-based costing will give Walton’s managers more accurate production costs. ABC
    improves greatly the manager’s decision making as they can use more reliable product cost data.
    ABC helps usefully in fixing selling prices of products as more correct data of product cost is
    now readily available.

     Tracing of Activities for the Cost Object

    ABC uses multiple cost drivers, many of which are transaction based rather than product
    volume. Further, ABC is concerned with all activities within and beyond the factory to trace
    more overheads to the products.

     Assigning specific overhead costs to more expensive products

    Instead of assigning an equal value to all products, Walton can allocate the necessary budget in
    each area when using activity-based costing. This can also help with identifying costs that apply
    to more than one pool of manufacturing products, which can make resources more valuable.

     Evaluate the efficiency of productions and make improvements

    By breaking down the indirect cost of each activity, they can make improvements. Managers
    can evaluate things like management influence, efficient processes and the overall cost of
    different departments.

     More accurate data for profit margins:

    Activity-based costing accounts for non-manufacturing costs or indirect costs that may not have
    been considered on other method, it can help with improving profit margins which is important
    to their business leaders to make important decisions. It can also help reduce or transfer
    production costs, allowing management to improve their profit margins even further with
    effective pricing strategies.

     Cost Management
    ABC provides cost driver rates and information on transaction volumes which are very useful to
    management for cost management and performance appraisal of responsibility centres. Cost
    driver rates can be used advantageously for the design of new products or existing products as
    they indicate overhead costs that are likely to be applied in costing the product.

     Use of Excess Capacity and Cost Reduction

    ABC, through the processes of pooling of activity costs and the identification of cost drivers,
    can lead to the identification of spare capacity and the fostering of cost reduction by comparing
    the resources required under ABC with the resources that are currently provided.

    Conclusion:
    The objective of this study was to provide a proof of the concept of how Activity-Based costing
    implementation goal could successfully be achieved. The analysis of Activity-Based costing
    found that, although Walton follows process costing for cost allocation, the ABC is the most
    accurate cost allocation method as it allows the identification of the cost and the performance of
    the activities, resources and cost objects of a company. The results of the ABC model disclose
    the hidden sources of profitability and the embedded costs and this model contributes to
    decision-making of the management allowing improvement of the profitability. The only
    inconveniences of this model are that it requires a lot of resources, calculations and updating.
    Adequate research is required into the individual components of the model before it can be used
    with confidence.

    You might also like