How activity-base costing affect cost-volume-profit analysis

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Assignment

While a form of ABC was being used by General Electric back in the sixties, widespread use of ABC didn't began in the United States until the late eighties. The early focus of ABC was on developing more reliable product cost numbers to improve firms' product-related strategies (e.g., pricing, product profitability, and product emphasis). But more recently, companies have found activity-based management to be of even greater profit.

Required:

1- Why change to ABC? What is different about the competitive, product, and process environment today that would cause a company to consider implementing an ABC system?

2- Give examples of how an ABC system can result in more reliable products costs than conventional labor-based product costing system.

3- Why did the use of ABC change from a focus on generating more accurate product cost numbers to a greater emphasis on its use for cost planning and cost reduction?

4- Explain briefly how activity-based costing (ABC) affects cost-volume-profit analysis.

Reference no: EM131333088

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