Activity Based Costing Essay Example | Topics and Well Written Essays - 250 words

Activity Based Costing - Essay Example Conventional costing methods have caused problems in their implementation in most companies. This is because of the constant change in technological advancement which requires the use of modern methods of costing. The use of the ABC system creates difficulties in the separation and allocation of some overhead costs on a product unit. For instance, the Chief Executive Officer’s salary does not provide the management with the appropriate reports on costs. The ABC method allocates business cost on a proportionate basis to products or based on assumptions (Lawrence, 2004). This makes inaccurate reports on costs to be generated to the management. Some of the traditional methods of costing ensure accuracy of information which can lead to a competitive advantage. ABC is a costly method as compared to the traditional methods, but it is the most efficient. In planning implementation of ABC method, it is important to identify key purposes of the information that the method will provide. A well designed ABC method can form the basis of improved budgeting and capacity of resource planning (Lawrence, 2004). Organizations need to understand their cost structures and have a cost management system that supports the understanding. Effective management of both ABC and the conventional methods may have greater profitability to the

Sainsbury's Case Study Essay Example | Topics and Well Written Essays - 1500 words

Sainsbury's Case Study - Essay Example From the auspicious events in the 1970’s to the menacing 21st century, the company stakeholders had to remain on their toes being susceptible to the fluctuating financial position of the company. Impact of the problems and the solution strategy on the Investors: It was all going favourable for the company investors till the start of 2002 when the situation began to worsen. The profit position of the company deteriorated in 2004 which initiated the warning signals for the investors. The fact that half of the Board of Directors and some of the executives had resigned created a bleaker picture for the financers of the company and hence shook the investor confidence. This must have created immense problems and communication gaps between the two parties involved. This situation demanded a huge drive towards relationship management in the company. The company management and executive board needed to minimize the communication gap and that could have been done by calling company meet ings and putting up issues in the annual general meeting of the company (Kehoe 2011). To boost the investor confidence the company would have to work on promotion efforts in the public sector. On the other side, the management had started to form negative connotations of the Sainsbury family’s efforts. ... There were also discrepancies in the financial matrices of the company that created a lot of misconceptions for the investors. The strategies that were later used by the company also impacted the investors. For example, the management spent ?3bn on IT systems which certainly alarmed the investors in such troublesome times. In these times the company management badly needed to find policies that could create motivation in the investors and revise cordial relationships between the company stakeholders. All measures that had to be implemented impacted the investor directly or indirectly. Even the policy of finding a target market had implications for the investors (Shah 2012). The executives of the company had to use this concept as a yardstick in the process of decision making and strategic planning. From the case study we can easily identify that the investors wanted rapid profits at this time which obviously was not feasible. Impact of the problems and the solution strategy on the Bo ard of Directors: The entire scenario under discussion posed serious questions on the viability of the company that should have been very worrisome for the company directors. The strategic decision making in these tough times was very difficult and each decision could have created a do or die situation for them. Hence prudence in each implementation step was needed to a lot of extent. The problems such as that of weakening financial position of the company must have led to people pointing fingers at the directors. The directors would have faced pressures not only from the investors but also from the employees. The point of losing market share must have popped up concerns