Activity-Based Costing and Capacity Harvard Case Solution & Analysis

We discuss the use of the budget, not the historical data in activity-based costing (ABC) model, and argues for the calculation of tariffs on practical potential, not actual use. ABC model is not necessarily limited to the analysis of historical data. At a cost driver rates are calculated based on projected data, they can be used for active solutions, such as pricing and decision. Second, to avoid distortion of the cost driver rates for the unused capacity, rates should be calculated using the practical capacity of the resources of the business. Discusses how to assess the practical potential in various situations, including lump purchasing power, acceleration capacity, seasonal and peak capacity, and different levels of quality of service delivered to the output. "Hide
by Robert S. Kaplan 10 pages. Publication Date: Mar 04, 2005. Prod. #: 105059-PDF-ENG

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