ARistari

Hi,

Your question made me a little bit more curious about ABC, than what I have in my BPP manual. So, I took my time and surfed the web some more, and this is what I found:

As advantages:
- More accurate costing of products/services, customers, SKUs (Stock Keeping Units), distribution channels
- Offers a better overview and understanding of overheads - an improved means of identifying high overhead costs per unit and finding ways to reduce the costs
- Raises awareness over waste and other non value adding items - ABC can identify high overhead costs per unit and find ways to reduce the costs, avoid decreases in head counts due to inaccurate allocation of costs, and measure profitability with higher accuracy than traditional costing that uses direct-labor hours as the only cost driver.
- Supports performance management and scoredards - by understanding product and customer profitability, thus supporting top management's decision making process
- Enables costing of processes, supply chains and value streams, activity centers - based on the number of events or transactions that are taking place in the process of providing a product or a service.
- Facilitates benchmarking - achieving a better positioning of products
- Integrates well with continuous improvement programes (eg. Six Sigma) - when employees understand the costs involved, than they can identify the activities that add/do not add value. Based on this improvements can be implemented and the benefits realized.

And disadvantages:
- Time consuming for collecting accurate data
- Difficult to implement - Identifying activities or processes to be allocated properly is cumbersome and takes a lot of effort. It requires that processes are adequately mapped throughout the organization. For a company that has undertaken a quality effort, or an effort to reengineer business processes, a major part of the work may already be completed. But for those who have not it is likely to be a major undertaking
- Higher costs to implement and maintain the system - Activity-Based Costing makes a lot of sense for companies with multiple products or services who are suffering from inaccurate costing information and need to know which products are really winners and which are losers. For these companies the effort required to successfully implement ABC is worth the time and resources.

Despite the obvious benefit, it seems that in practice, even though this method is so praised, the disadvantages take a higher stand and not so many companies adopt ABC.
Did you hear about this as well? What do you think?

randa

when we can start, u now no time

Taejeah

Originally Posted by ARistari

Hi, Your question made me a little bit more curious about ABC, than what I have in my BPP manual. So, I took my time and surfed the web some more, and this is what I found: As advantages: - More accurate costing of products/services, customers, SKUs (Stock Keeping Units), distribution channels - Offers a better overview and understanding of overheads - an improved means of identifying high overhead costs per unit and finding ways to reduce the costs - Raises awareness over waste and other non value adding items - ABC can identify high overhead costs per unit and find ways to reduce the costs, avoid decreases in head counts due to inaccurate allocation of costs, and measure profitability with higher accuracy than traditional costing that uses direct-labor hours as the only cost driver. - Supports performance management and scoredards - by understanding product and customer profitability, thus supporting top management's decision making process - Enables costing of processes, supply chains and value streams, activity centers - based on the number of events or transactions that are taking place in the process of providing a product or a service. - Facilitates benchmarking - achieving a better positioning of products - Integrates well with continuous improvement programes (eg. Six Sigma) - when employees understand the costs involved, than they can identify the activities that add/do not add value. Based on this improvements can be implemented and the benefits realized. And disadvantages: - Time consuming for collecting accurate data - Difficult to implement - Identifying activities or processes to be allocated properly is cumbersome and takes a lot of effort. It requires that processes are adequately mapped throughout the organization. For a company that has undertaken a quality effort, or an effort to reengineer business processes, a major part of the work may already be completed. But for those who have not it is likely to be a major undertaking - Higher costs to implement and maintain the system - Activity-Based Costing makes a lot of sense for companies with multiple products or services who are suffering from inaccurate costing information and need to know which products are really winners and which are losers. For these companies the effort required to successfully implement ABC is worth the time and resources. Despite the obvious benefit, it seems that in practice, even though this method is so praised, the disadvantages take a higher stand and not so many companies adopt ABC. Did you hear about this as well? What do you think?

This is a great answer and i appreciate the efort you took in a research process separate fromt the study text.

I have posted soe more questions for the members of the group to answer then we can comment and give our advice as a group.

Question - Would you remeber these answer if you had to mention them in the exam?

WHats your study method like for F5?

ARistari

I've seen the questions, and I'm working on them. They turned out to be really interesting topics.

To answer your question, yes, I would remember the above answer, but that is just becouse I researched for it, and instead of just copy-pasting from a website into this page, I tried to compile several opinions and use my own words (did not succeed entirely, but trying matters enough)

As for studying... I am looking for understanding the rationale behind the thory and than apply it by myself. Study Cases are the key for me. I am also lucky, that I work full time, and I actually use what I learn.

What is your favourite learning method? You are asking a lot of questions, but not realy offering an opinion.

Taejeah

Originally Posted by ARistari

I've seen the questions, and I'm working on them. They turned out to be really interesting topics. To answer your question, yes, I would remember the above answer, but that is just becouse I researched for it, and instead of just copy-pasting from a website into this page, I tried to compile several opinions and use my own words (did not succeed entirely, but trying matters enough) As for studying... I am looking for understanding the rationale behind the thory and than apply it by myself. Study Cases are the key for me. I am also lucky, that I work full time, and I actually use what I learn. What is your favourite learning method? You are asking a lot of questions, but not realy offering an opinion.

Hi,

I just started to understand costing and find it kinda interesting.

My study method - I attend a full time school and i review my lesson as often as i could (right now i am behind time) however i revise and go over the questions. My weakness is interpreting what exactly the examiner is asking for and i also think that the pass rate intimidated me. Because i will no what to do but when its time to do a question i will just freeze.

On Wednesdays i study costing so that is why i havent been able to post my answer as yet as i am taking other courses.

And yes i ask questions because that 1 way to learn and get ideas.