Glaser Health Products Essay
Glaser Health Products of Ranier Falls, Atlanta needs assistance in evaluating and classifying costs to be able to implement a great activity-based priced at system. Mentioned previously in the case, these kinds of costs will be used for preparing and control decisions rather than inventory value.
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The activity-based costing program will provide better allocation of Glaser’s expenses rather than a program to look at the fee drivers or perhaps the activities that their overhead costs comprise. Glaser’s general structure of an activity-based costing model should incorporate cost items, activities, usage of resources, and expense. Activity-based costing changes “the rules from the game” because it changes a few of the key measures that manager’s use for their decision making as well as for evaluating individuals’ performance (Accounting4management. com).
For Glaser to implement an excellent activity-based being system managing must look into their expenses and warrant whether or not they have enough overhead to get worrying about. Whilst we do not find out Glaser’s monetary value of their overhead costs, it seems that they have several sections with a large amount of cost types management must consider. Three main sections of Glaser Health Products are Functions, Sales, and Administrative.
Under each split are costs categories which have been divided about help supervision determine where they are supposed to be. (Appendix A identifies all the costs while using appropriate division). Next, management must identify the big cost to do business cost in order to determine whether they want to allocate some or a bunch of overhead making use of the activity-based being system. I suggest that Glaser creates a great activity-based costing system that allocates, with a minimal amount of effort, a large percentage of their overhead. For instance, management is correct in identifying each one of the costs using four distinct activities.
Such as unit-level actions, batch-level actions, product-level actions, and facility-level activities. This is a great system because the fewer activities Glaser can use to do this, the easier the accounting will be for administration. These several activities will allow Glaser to fairly and accurately set aside overhead to product lines. (Appendix B shows each of the costs under one of many four activities and also classifies the 4 activities underneath one of the 3 divisions).
After Glaser supervision has determined the several the activities that connect cost to do business expenses to products, they must use the appropriate measure (the cost driver) to connect the overhead expenses towards the product lines or service lines. To achieve this management must designate an appropriate price driver to get tracing expenses associated with the various levels of activities to the next cost aim or items. The cost individuals can include a number of things such as immediate labor hours, number of amounts, or range of employees. (Appendix C reveals the appropriate price driver together with the various numbers of activities).
Within the Activity-based charging system, Glaser will use initial stage expense drivers to link costs of methods consumed in one activity centre to different activity centers. Some costs, such as batch-level activity center costs will be initially assigned to a main stage activity center and later need a sole assignment method, and are traceable to particular products but often make use of a cost driver. Product-level activity center costs may be relevant to a specific item or assembled by activities before staying assigned to products in the primary stage. Facility-level activity center costs may proceed through multiple preliminary stages ahead of being given to items (Schneider, 2012).
It is necessary to make use of a preliminary stage cost driver because this program assigns costs from actions to other activities. On the other hand, major stage cost drivers is utilized to designate costs via activities to the cost aims. This process eliminates distortions in cost allocations to items that result from production complexness (Schneider, 2012). Actually sitting down and having an activity-based costing program for a true company is much more difficult compared to a typical book ABC trouble.
Determining what can cause a cost to happen is much more difficult than this originally may appear (Krupnicki & Tyson, 1997). Overall, I do believe that management’s decision to implement a great activity-based charging system is likely to work in their favor. Your decision to apply ABC is normally driven by the need to increase customer profitability analysis, to get more accurate expense information to get pricing or to prepare relevant budgets (Cohen, Venieris, & Kaimenaki, 2005). In this case, Glaser wants to discover costs used for planning and control decisions rather than for inventory valuation.
Glaser is likely to observe many benefits via implementing an activity-based costing system just like better profitability measures, better decision-making, procedure improvement, cost estimation, and cost of unused capacity. The activity-based costing system can provide better share of Glaser’s overhead costs rather than system to look at the cost drivers or the activities that all their overhead costs comprise. References http://www.accounting4management.com/implementing_activity_based_costing.htm Schneider, A. (Ed. ). (2012). Managerial Accounting: Making decisions for the Service And Manufacturing Industries. San Diego, CA: Bridgepoint Education.
Krupnicki, Meters., & Tyson, T. (1997). Using DASAR to Determine the Cost of Servicing Clients. Management Accounting, 79(6), 40-46. Retrieved coming from http://search.proquest.com/docview/229739140?accountid=32521 Cohen, S., Venieris, G., & Kaimenaki, E. (2005).
ABC: Adopters, Followers, and Deniers And Unawares. Managerial Auditing Journal, 20(8), 981-1000. Recovered from http://search.proquest.com/docview/27453714?accountid=32521
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