Question

"Time-Driven Activity-Based Costing (ABC)" Please respond to the following: Analyze the major benefits and major weaknesses of traditional Activity-Based Costing (ABC) in determining accurate overhead costs over a time-driven ABC system. Provide a rationale for your response. Suggest the manner in which a business can achieve a competitive advantage in the marketplace through the use of ABC. Provide two (2) reasons to convince senior management that they should implement an ABC system.

Answer 1

Answer : ABC analysis - this system exercise discriminatory control ivov different items of inventory on basis of their investment involved

Their are classified into three categories on their respective important basis

1) A: Category - this category consists of items only asmall percentage i.e about 10% of total items handled by stores but requires hevyh investment about 70% of inventory value because of their high prices or heavy requirements

2) B: this category of items of less important they may be 20%
of the total items of material handled by stores. The percentage of investment required

3) C: This category of items does not require much investment
It may be about 10% of total inventory value but they are nearly 70% of the total items handled By store
is about 20% of the total investment in inventories.

It's advantages for business are

Lower cost

Continuity in production

Less attention required

Systematic working

Thanks hope this helps you