Question

ABC can be used in many industries. Research UPS in the delivery service industry and explain how it is used by the company and what benefits are provided by the system

Answer 1

Activity based costing can used for effectively use of organiation resourses, in service industry also it help to reduce cost by effective implementation of it

Service industry can use abc in following way,

1 Assigning of cost to each activity performed by industry

2 Split the industry into profit Devision

3 Prepare list of services associated with each services

4 Allocation of cost to each services

5 Comparision of Related cost and benefits

6 Succesful implementation of abc and reporting to the appropriate level of managment.

Benefits

1 More accurate cosintg of services

2 it provides Correct and accurate information

3 it helps in better decision making

4 Better allocation of overhead

5 Discover unneccesary processes and cost related to it

6 Better understanding and justification of cost.

Disadvantages

1 Collection and preparation of data is time consuming

2 Costly to collect and analyze information

3 Difficult to find correct sources through which information can be collected

4 Not useful for companies in which overhead is in small portion

5 Report generated by ABC may not be always usable for external reporting.