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Essay / Research Paper Abstract
This 3 page paper looks at the way that activity based costing (ABC) may be applied to products from a well known fast food chain. Using the example of French fries and apple piers the paper provides a practical example of the way activity based costing takes place. The bibliography cites 3 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEABCMcDon.doc
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Unformatted sample text from the term paper:
allocated. The alternate method is activity based costing (ABC). This takes a different approach to assessing costs; it looks at costing the different stages or activities which take place to
produce the product (or service). This can be applied in any scenario where there are at least two processes required for the production of a good or service (Watts,
2007). The argument is than this creates a more transparent for of costing that is more likely to reflect the actual cost of the production process (Kaplan and Cooper, 2008).
The process can be demonstrated by using a simple example. Here we will use the example of McDonalds, the fast food chain and apply the process to two different products;
fries and apple pies. The actual figures are no available so we will make some assumptions. To undertake an activity based costing exercise it is necessary to break down
the production into the different activities. The first cost is the needed is the material needed for the production; these include the frozen French fires and the frozen apple pies,
the packaging they will be sold in and the oil that will be used to cook them. There are also the bags that the products will be sold in. These
are all input materials and are needed for the first stage of the ABC process. Now we can look at the processes that are undertaken. The first activity is
the receipt of the goods by the restaurant; this is an activity as it uses resources and is a process where there are costs. This cost is calculated by assessing
the cost of this process per unit (Laurinaviciene and Mackevicius, 2011) In this case it may involve taking the entire cost of the good inwards activity and the cost per
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