Hi I need help writing a reply to a classmate response in accounting class. it is due TODAY NOV 18, BY 10PM EASTERN TIME no less than 200 words with references and citations please. Plagarism free work please this will be sent through turnitin. Thank you
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There appears to be some disagreement about the relevancy and usefulness of Activity Based Costing (ABC) among business leaders and accounting types. In fact, research conducted by Stratton, Desroches, Lawson & Hatch (2009) found that among both ABC users and non-users there were several major common concerns regarding the use and applicability of ABC. Specifically, their research revealed that concerns about how costs are allocated, ensuring that the allocations reflect the actual use of resources, a lack of timely information and difficultly with revising or updating the ABC system were commonly reported (p.35). However, the same researchers also found that these two groups (i.e. ABC users and non-users) most commonly reported that they perceived the benefits of ABC to include; better information upon which to base product decisions, an enhanced ability to conduct profitability analysis for individual products or services, and better information for assessing and making operational improvements and performance evaluations (p.33).
These results seem to imply a couple of key things. First, that it takes real work and commitment to implement and continue to administer an ABC program within an organization. Second, that if one successfully accomplishes the first challenge, the information gained can be very useful and worth the effort for the company.
In order to achieve success on the first item above, it appears that there are at least a couple of critical considerations. The initial implementation of an ABC program within a company needs to have the full support of management and the project team must include those key individuals necessary to correctly design and carryout the program (Agbejule, 2006, p. 68). Ensuring that project leaders and all staff involved in this phase have a good understanding and basic education about ABC is also important to ensuring the necessary organization commitment over time (Agbejule, 2006, p. 68).
Another consideration appears to be important to the overall long-term success of any ABC implementation. Specifically, companies need to understand that the program will likely need to be periodically revised and updated. Adopting an ABC program and then just “leaving it alone” may not result in the desirable outcomes and benefits suggested above. It appears that the project team will need to consistently evaluate the program to identify those things that are working well, and those that are not. In fact, Ray and Gupta (1992) point out that “…if ABC is to achieve its maximum effectiveness, it should be closely monitored” (p. 46). They go on to opine that internal auditing of the ABC program should include specifically looking at the identified cost drivers, how common costs are being assigned and how new products or lines will be incorporated into the ABC program (p.46). Finally, the overall usefulness of the ABC program in comparison to the cost and effort of implementation should be frequently evaluated (Ray & Gupta, 1992, p.46).
Agbejule, A. (2006). Motivation for activity-based costing implementation. Journal of Accounting & Organizational Change,2(1), 42-73. doi:http://dx.doi.org/10.1108/18325910610654126
Ray, M. R., & Gupta, P. P. (1992). Activity-based costing. The Internal Auditor, 49(6), 45. Retrieved from http://search.proquest.com.proxy.davenport.edu/docview/202731031?accountid=40195
Stratton, W. O., Desroches, D., Lawson, R. A., & Hatch, T. (2009). Activity-based costing: Is it still relevant? Management Accounting Quarterly, 10(3), 31-40. Retrieved from http://search.proquest.com.proxy.davenport.edu/docview/222805126?accountid=40195