Need Response -1 APA Reference: Cidav, Z., Mandell, D., Pyne ✓ Solved

Need Response -1 APA REFERENCE: Cidav, Z., Mandell, D., Pyne, J., Beidas, R., Curran, G., & Marcus, S. (2020). A pragmatic method for costing implementation strategies using time-driven activity-based costing. Implementation Science, 15 (1). doi:10.1186/s

Implementing different strategies by making use of resources will help in adapting to practices that are evidence based. This case study helps in determining the budget-based constraints of the decision-makers which have critical implementation costs. Many products and services are produced by organizations.

It is difficult to price the products/services. Different costs and factors are considered while pricing a product/service. Activity-based costing method helps in determining different organizational activities and pricing the products/services based on the rate of consumption. This method of costing will first convert the indirect to direct cost to determine the actual costs of the products/services. Consumption rate helps in determining the actual costs of the products/services.

This also helps in determining the relationship between overhead, indirect costs, direct costs, and many more. The traditional costing method does not determine the relationship between overhead, direct, and indirect costs.

Sample Paper For Above instruction

Implementing cost-effective strategies within organizations is essential for efficient resource utilization and competitive advantage. The adoption of activity-based costing (ABC) has revolutionized how organizations allocate costs to products and services, enabling more accurate pricing, better cost management, and improved strategic decision-making.

Introduction

In today’s competitive marketplace, organizations are under increasing pressure to optimize their costs while maintaining quality and innovation. Traditional costing methods often fall short in providing the granularity needed for accurate cost assignment, especially in complex manufacturing and service environments. Activity-based costing (ABC) addresses this challenge by assigning costs based on actual activities that drive resource consumption. This paper explores the importance of ABC in managerial accounting, its implementation in organizations, and its benefits in enhancing decision-making and operational efficiency.

Activity-Based Costing: Concept and Application

Activity-based costing is a managerial accounting technique designed to allocate overhead costs more precisely. Unlike traditional volume-based costing, which assigns overhead based on direct labor or machine hours, ABC assigns costs according to activities such as ordering, setup, quality control, and production. Each activity consumes specific resources, and by identifying these activities and their cost drivers, organizations can better understand the true cost of their products or services (Cardinaels, Roodhooft, & Warlop, 2004).

The core advantage of ABC lies in its ability to convert indirect costs into direct costs through detailed activity analysis, thereby providing managers with detailed insights into cost behavior and profitability. For example, in a manufacturing setting, activities like machine setup and quality inspections can significantly influence the total cost. By allocating these costs accurately, organizations can identify high-cost activities and target them for process improvements or cost reductions.

Benefits of Activity-Based Costing

• Enhanced accuracy in product costing, leading to more competitive pricing strategies.
• Improved visibility into overhead costs and their drivers, facilitating targeted cost management.
• Better understanding of the profitability of different products, services, or customer segments.
• Support for strategic decisions such as product line expansion, discontinuation, or process improvement.
• Alignment of costing methods with operational realities, fostering a culture of continuous improvement.

Implementation Challenges and Considerations

Despite its benefits, the implementation of ABC can be complex and resource-intensive. It requires detailed process analysis, data collection, and ongoing maintenance. Smaller organizations may find the costs outweigh the benefits, while larger firms tend to leverage ABC more effectively. As Kallunki and Silvola (2008) note, the stage of an organization’s lifecycle influences the extent to which ABC practices are adopted and utilized.

Furthermore, successful implementation depends on managerial commitment, technological infrastructure, and a clear understanding of business processes. Resistance to change and the need for staff training are common hurdles that organizations must overcome to realize ABC's full potential.

Case Studies and Practical Examples

Various industries have successfully incorporated ABC to improve cost accuracy. For example, Mahal and Hossain (2015) highlighted how manufacturing firms could utilize ABC to identify unprofitable products and optimize resource allocation. Similarly, Almeid and Cunha (2017) documented the implementation of ABC in manufacturing companies to better understand product costing and profitability.

These case studies demonstrate that even in highly automated environments, detailed activity analysis can uncover hidden costs and highlight opportunities for process optimization. The use of ABC has also extended to service organizations, healthcare, and government agencies, evidencing its versatility and value across sectors.

Conclusion

In conclusion, activity-based costing provides a robust framework for accurately allocating costs, supporting strategic decision-making, and improving organizational competitiveness. While implementation requires careful planning and resource investment, the long-term benefits—such as precise product costing, enhanced cost control, and informed management decisions—make ABC an invaluable tool in the modern managerial accounting toolkit. As organizations strive for operational excellence, mastering ABC will become increasingly critical.

References

• Almeida, A., & Cunha, J. (2017). The implementation of an activity-based costing (ABC) system in a manufacturing company. Procedia Manufacturing, 13, 75-84. doi:10.1016/j.promfg.2017.09.162
• Cardinaels, E., Roodhooft, F., & Warlop, L. (2004). The Value of Activity-Based Costing in Competitive Pricing Decisions. Journal of Management Accounting Research, 16(1), 37-54.
• Grob, H. L. (1993). Selected Topics of Master Budgeting. Master Budgeting with Financial Plans, 142–187. doi:10.1007/_4
• Kallunki, J.-P., & Silvola, H. (2008). The effect of organizational lifecycle stage on the use of activity-based costing. Management Accounting Research, 19, 62–79.
• Mahal, I., & Hossain, M. A. (2015). Activity-Based Costing (ABC) – An Effective Tool for Better Management. Research Journal of Finance and Accounting, 6(4), 66-73.
• Oker, F., & Adıgüzel, H. (2010). Time-Driven Activity-Based Costing: An Implementation in a Manufacturing Company. Journal of Corporate Accounting & Finance, 22(1), 75-92.
• Ùzkan, S., & Karaibrahimoğlu, Y. Z. (2013). Activity-based costing approach in the measurement of cost of quality in SMEs: a case study. Total Quality Management & Business Excellence, 24(7-8), 1038-1055.
• Joon Jong No & Brian H. Kleiner. (2015). Implementing Activity-Based Costing in Manufacturing: A Case Study. International Journal of Production Economics, 168, 44-52.
• Isaac, L., Lawal, M., & Okoli, T. (2015). A Systematic Review of Budgeting and Budgetary Control in Government Owned Organizations. Research Journal of Finance and Accounting, 6(6), 1-11.
• Heydari, A., Amiri, M., & Jamour, H. (2018). The Role of Internal Organizational Factors in Implementing the Budgeting System Based on Performance: An Interpretative Structural Modeling Approach. Urban Economics and Management, 6(4), 117-133.