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Essay / Research Paper Abstract
This 3 page paper looks at the concept of activity based costing and applies the concept to McDonalds and the process of preparing and serving a portion of chicken nuggets. The bibliography cites 5 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEABCMcDc.rtf
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Unformatted sample text from the term paper:
benefiting from the economies of scope and scale. This means that pricing is a very important aspect of business, especially where there are potentially low individual profit margins. With the
sale of many small items it is tempting to use an absorption costing approach, and while there will be some costs known and controls used in terms of the way
portioning take place, there is a significant advantage to understanding the real total costs of providing the different types of products, aiding with pricing and const control (Watts, 2004).
One approach that can be utilised to give effective costs on the manufacture and sales of products is activity based costing, this is an approach where the costing process seeks
to identify the different activities that are undertaken in order to provide the good or the service and then use these to assess the real cost of the creation of
that product or service (Li, 2008; Kaplan, and Atkinson, 1998). Activity based costing is useful where there are repeated processes tasking place, McDonalds is based on the creation of a
limited number of products in a repeated fashion that can be broken down by process, making it suitable of activity based costing (Cardos and Pete, 2010). The firm sells
may different types of product, including chicken nuggets (known as McNuggets); this is a process that may be broken down into different processes in order to assess the cost per
portion sold. To undertake this with an activity based costing approach the different processes need to be identified and then cost drivers for each stage assessed. The first stage
is the receiving of the goods into the store. The chicken nuggets are delivered frozen, on a delivery van with other frozen foods. If it is assumed that the cost
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