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Essay / Research Paper Abstract
A 3 page paper reviewing the benefits and purposes of activity-based costing (ABC) and assessing piano manufacturer Steinway & Sons as to whether ABC is a valid approach for that company. The paper concludes that ABC absolutely is a valid approach for Steinway and could assist the company in identifying areas in which it could improve processes, a feature of focus in the company 100 years ago. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSacctABCSten2.rtf
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Unformatted sample text from the term paper:
In the current business climate of intense competition that only continues to increase, most companies find themselves scrambling to keep up with growth as well as keep up with
costs. They add new products and services either to remain competitive or increase revenues, all the while knowing they also must increase profitability as well as revenues. Though
Steinway and Sons is not as openly subject to whims of the market, it does need to know its costs. One of the
purposes of accounting is to identify and track costs and profitability. Traditional costing systems were adequate in times past, but those systems are quickly giving way to activity-based costing
(ABC) systems that are more efficient at identifying true costs and profitability of production, whether those products are goods or services. ABC Horngren,
Sundem and Stratton (2002) define the ABC system as one that "accumulates overhead costs for each of the activities of the area being costed, and then assigns the costs of
activities to the products, services, or other cost objects that require that activity" (p. 139). Activity-based costing can identify which activities are the most profitable for the company, thereby
showing it where it needs to place the most emphasis of effort. It may be allocating too great a portion of resources to an activity that is less profitable
than another receiving a smaller share. The ability to refine this cost-and-result approach can increase profitability without the need of increasing revenues.
Cooper and Slagmulder (2000) write that there are "three fundamental ways that firm profitability can be increased" (p. 63): * Secure better prices for required resources; * Operate more efficiently;
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