Solution of managerial accounting abc method case study allied office product

In an industry where competitors are practically clones of one another is it very helpful to be able to show how your organization is different, and in this case better, than the other companies in the industry. Here are the steps that one has to undertake.

So, we could easily see the cost for each activity related to our cost of items purchased. The cost of basic Warehouse Stock Selection comes from the number of lines ordered.

Solution of managerial accounting abc method case study allied office product

The cost of basic Warehouse Stock Selection comes from the number of lines ordered. TFC will charge services based on Step 3 — What does the unit cost per activity represent? The 1. These exhibits would change drastically if they clients were charged for their services. The SBP system will allow Allied to charge their clients for what they actually use, resulting in much more reliable cost figures for each client. Allied has incorporated a new program called Total Forms Controls TFC for its clients enabling Allied to separate this business form division to handle client accounts. TFC itself had a value chain starting from storage and inventory financing, requisitioning, stock selection and pick-pack, order entry billing, desk top delivery, and freight.

Furthermore, unhappy customers due to the fact that some will be charged more should not be a problem. In addition, desktop Delivery by the number of deliveries Cost per activities can be found.

The 1.

Total: 5. Words: , Paragraphs: 10, Pages: 4 Publication date: June 03, Sorry, but copying text is forbidden on this website! We use weight-average method to allocate order entry expenses into three activities, manual order, line items, and EDI checks. This is due to the fact that Customer A requires far fewer services than Customer B does. Therefore, Allied should reduce the number of the account to reduce the cost and to improve the profit. This is a nearly invaluable characteristic of TFC idea. However, customer B have 25 desktop deliveries. Customer B now is less profitable however they are a heavy user of the services since they do not have to pay services offered by TFC. Additionally, the cost for EDI checks is more cheaper than the other two. TFC has no uniqueness on its product. With the information obtain from the new ABC costing system, Allied should charge more to Customer B for the services rendered to them and charge less to company A for the less used of the services provided. Allied operated its forms manufacturing and TFC activities as separate profit centers. Additionally, interest expense for customer B is also very higher because of his payments always after 90 days with a higher payment amount.

On the other hand B type customers are unprofitable and hence we should drop them. From the forms manufacturing, the products move to forms sales. TFC needs to stay the way it is, sans the desk top delivery.

Allied expanded its business by making warehouse and distribution network.

allied office products case

The cost of requisition Handling is determined by number of requisitions. We can figure out which activity is more costing and take control this cost to increase our profit.

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