Question

Q 1 Salem Corporation is producing product A. The company had problems related to quality. Customers have been returning the product in the last months.

   ABC costing method and ABM can be used to manage quality.

a.   Define each type of quality-related activity and give one example of each activity type.

b.   Suppose the managers implement an ABC system to measure the costs of quality. How could they use information from this system to improve the product?

plz no photo answers or handwriting.

Answer 1

1.Activity based costing ABC is a method for assigning costs to products, services

based on

• Activities that go into them.
• Resources consumed by these activities.i.e it depicts each activity as a cost driver.
• when a particular cost is incurred to perform a particular service no issue arises, but allocation of certain indirect costs that has occured on number of activities is really a mess, insuch situation, ABC costing method uses each activity as a cost driver to some indirect costs.
• for ex, if a particular order has come, no difference in allocating the direct cost, but ABC costing in instance of allocating the indirect costs measures the activity rate of all such indirect costs on an activity rate and allocate them in respect of those %s.

ABM Quality management: for analyzing the processes of a business to identify strengths and weaknesses.and seeks out areas where a business is losing money so that those activities can be eliminated or improved to increase profitability. ABM analyzes the costs of employees, equipment, facilities, distribution, overhead and other factors in business to determine and allocate activity costs and focuses on business processes and managerial activities driving organizational business goals, activity-based costing seeks to identify and reduce cost drivers by optimizing resources.
ABM helps a company's management to determine which activities contribute to productive efficiency and which do not

For instance, ABM might help a company to determine whether or not its technical support functionality is overstaffed with respect to its client callvolume.