Question

Activity-Based Costing (ABC) in Service Industries

Research a publicly traded company that engages in e-commerce activities.

Write a 5–6-page paper in which you:

Describe the company you researched in 1–2 paragraphs.

Discuss how an Activity-Based Costing (ABC) system can be implemented in the company you researched and the benefits that the use will yield to the business performance.

Assess how using an ABC system can provide a competitive advantage to the company in the e-commerce marketplace for which it competes and the resulting impact to the business performance.

Examine the potential impact of ABC costing on e-commerce activities compared to those provided through traditional channels, considering how this knowledge will impact decisions made by management about these services.

Use at least three quality academic resources in this assignment. Use the Strayer Library to conduct your research. Note: Wikipedia and other websites do not qualify as academic resources.

Here is a list of U.S.-based, publicly-traded e-tailers that make all or the majority of their revenue from online sales, their stock symbol, and a brief description of their business. The list excludes companies that generate most of their sales from stores or that are based outside the U.S. even if their shares are traded on a U.S. exchange.

Amazon.com, Inc. [AMZN] started out as an online bookseller but now sells a wide range of products through its website. It also runs brick-and-mortar grocery stores following its August 2017 purchase of Whole Foods Market Inc.

Blue Apron Holdings, Inc. [APRN] sells ingredients—and provides recipes—for making meals at home.

Booking Holdings Inc. [BKNG] offers travel-related services through several websites, including Booking.com, Priceline.com, and Rentalcars.com.

/can pick one of the company/

Answer 1

Answer:

A US company in the service industry with e-commerce activities is Amazon.

Company description:

Amazon is America's E-Commerce and cloud computing company. It is the largest online retailer in the world with huge sales and market capitalization. It has largest customer base in online market. There are many companies which adapted Amazon's model, but non of them were as successful as Amazon was. The spread of E-commerce, had led to rise of several niche players in the market which took up a particular products or services revolving around similar themes like Amazon. Amazon created a mark for itself in the E-commerce industry against all the odds.

Time based Activity Based Costing system in Amazon –

Activity based model provides managers with a flexible cost model to capture the complexity of the operations. ABC has helped many organizations identify their cost and profit enhancement opportunities by evaluating the unprofitable customer relationships, process improvements on the shop floor, lower-cost product designs, and rationalized product variety. The potential of the ABC costing represents a huge opportunity for the big organizations which has large scale operations.

The capacity of most of the resources are measured in terms of time availability. But with the ABC approach Amazon can recognize all the resources whose capacity is measured in other units. For example, the capacity of a warehouse or delivery vehicle would be measured by space provided, while the memory storage would be measured by megabytes supplied. In these situations, the manager would calculate the resource cost per unit based on the appropriate capacity measure, such as cost per cubic meter or cost per megabyte. This way, business performance can be improved with the appropriate measure in the capacity for all the resources.

In case of the products that are sold online, time based costing is largely applicable. Say for example, there are 10 numbers of one product with a certain price. When the quantity reduces to 5, that is if 5 units the sold, the cost per unit will automatically increase. With a further more decrease to 2, the price of the unit will further increase. If there is only one unit in the system, the price will further increase. So, the costing here is time based.