What would be some of the indirect cost pools for your business?
accounting
Description
You will need to solve into two different steps the following assignment.
Read the Following article:
Krumwiede, K.R. (1998, April). ABC: Why it’s Tried and how it succeeds. Management and Accounting Web. https://maaw.info/ArticleSummaries/ArtSumKrumwiede98.htm
Imagine you proposed a hypothetical business. For instance, think about a restaurant, retailer, electronics, software provider, etc. and develop some initial ideas about what considerations need to be considered for the company to reach profitability.
As STEP 1, you will need to answer the following questions in your group.
- Describe your business. What product or service will you provide? What will be your strategy to focus on cost/efficiency or to provide high value?
- How much will you charge for your product; what factors do you have to consider for setting the sales price?
- What would be the variable costs you would have to consider for your business?
- What would be the fixed costs you would have to consider for your business?
- Do you believe that your business can break-evaen in its first year? Why or why not? Make sure to take volume into account.
STEP 2
How could activity-based costing be applied in that business:
- What would be some of the indirect cost pools for your business?
- Would it make sense to implement ABC right away or would you stick to traditional costing? Why or why not?
