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Author Question: Even though there are no inventories for service companies, ABC systems are of great use for service ... (Read 206 times)

tiffannnnyyyyyy

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on: Jul 5, 2018
Even though there are no inventories for service companies, ABC systems are of great use for service companies. Explain why and how.
 
  What will be an ideal response?

Question 2

A field is a collection of related characters that comprise an attribute, such as a customer number or name.
  Indicate whether the statement is true or false


nmyers

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Reply #1 on: Jul 5, 2018
Answer to Question 1

Answer: Service companies find great value from ABC because a vast majority of their cost structure is composed of indirect costs. A major benefit of ABC is its ability to assign indirect costs to cost objects by identifying activities and cost drivers. Thus, ABC systems provide greater insight than traditional systems into the management of these indirect costs. The widespread use of ABC systems in service companies reinforces the idea that ABC systems are used by managers for strategic decisions rather than for inventory valuation. When it comes to public service institutions, activity-based costing is valuable for understanding, managing, and reducing costs but not for pricing decisions.

Answer to Question 2

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