Question

Using the GCU Library locate a journal article about responsibility accounting. In the subject line of your post, include the name of the article that you read. Post a link to that article with your initial post, and provide a summary and a reaction to the article. The summary should be approximately 250 words, and the reaction should be approximately 150 words. The summary should describe the major points of the article, and the reaction should demonstrate your interpretation of the article and how you can apply that knowledge. Do not choose an article that one of your classmates has already posted. To participate in follow-up discussion, choose one of the articles that a classmate has posted and provide your own reaction to it. Note: It will be challenging to find a relevant article if you do not use the library.

Answer 1

ANSWER:-

Article: How Does Activity-Based Costing (ABC)Work.

ABC pursues these goals essentially by making direct costs out of many costs that traditional costing treats as indirect costs. In this way, therefore, ABC aims to remedy some of the costing inaccuracies that occur, inevitably, under traditional cost allocation.

However, activity-based costing is known for being difficult to apply and labor-intensive. This reputation, no doubt, is partly due to ABC’s extensive data needs. ABC calculations need, for instance:

• Complete tracking data for workflow process details.
• Product-specific resource-consumption metrics.

Also, ABC requires analysis and calculations beyond traditional practice in project control and financial accounting.

Further comparison of traditional costing vs. ABC methods is beyond the scope of this article. CIMA (Chartered Institute of Management Accountants) defines ABC as an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs.

REACTIONS:

We can summaries that Activity-based costing (ABC) as an accounting method that identifies the activities that a firm performs and then assigns indirect costs to cost objects.

With ABC, a company can soundly estimate the cost elements of entire products, activities and services, that may help inform a company's decision to either:

• Identify and eliminate those products and services that are unprofitable and lower the prices of those that are overpriced (product and service portfolio aim)
• Or identify and eliminate production or service processes that are ineffective and allocate processing concepts that lead to the very same product at a better yield (process re-engineering aim)

In a business organization, the ABC methodology assigns an organization's resource costs through activities to the products and services provided to its customers.

ABC is generally used as a tool for understanding product and customer cost and profitability based on the production or performing processes.

As such, ABC has predominantly been used to support strategic decisions such as pricing, outsourcing, identification and measurement of process improvement initiatives.