Please read each initial question, initial post and then write a short response to the initial post.
Question 1: In its advertising, Ford Motor Company says “Quality is Job One.” Ford is indicating that good quality is the most important consideration for its customers. This would include customer satisfaction on delivery dates and specific areas of car performance, including properly closing doors, and defect rates. Explain how Activity Based Costing can help supply this information to Ford’s management.
Ian initial post: As per Averkamp (2013), “Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities” (para. 1). The Activity Based Costing (ABC) can implement The Ford Motor Company in such an effective way. ABC is an important element in which the manufacturing service department can easily track which activities has most corrective measure.By reviewing which activities have the most rework, Ford’s accounting department can initiate and develop alternative performance measures in order to reflect the benefits of manufacturing process changes. Activity Based Costing can help measure cost, performances, activities and resources in an effort to enhance Ford’s quality service. The ABC system can help companies, like The Ford Motor Company, produce products with the utmost top quality.
Refrain:
Averkamp, H. (2013). AccountingCoach. AccountingCoach.com. https://www.accountingcoach.com/activity-based-costing/explanation
Question 2: A local country club runs a very successful “19th Hole” that golfers frequent for a few drinks after a round of golf. The club also offers hot snacks to these golfers but the overhead of the food operation appears to be excessive. The new Golf Pro argues that the food operation should be discontinued because it is losing money and dragging down the net income of the club and thus affecting his bonus. As a management accounting student and a weekly golfer, what advice would you offer the Pro?
Ian Initial Post: As per Neuman (1975), “If, in the face of these difficulties, the enormous task of reducing overhead costs is delegated (in a special way) to every manager in the company, overhead can be successfully cut” (para. 1). In my opinion the local country club should refrain from unnecessary expenditures, thus decreasing potential losses. The management should also improve the quality and variety of the snacks in order to enhance customer satisfaction. The sale price of these snacks can also be increased in order to break even the profit of business. There should also be a way of increasing client market by attracting more golfers with the love of snacks in order to increase sales volume. I think the pro golfer should refrain from giving his input and really see that the business will do no good if the management cuts what the customers like.
References:
Neuman, J. L. (1975, May 1). Make Overhead Cuts That Last. Harvard Business Review. https://hbr.org/1975/05/make-overhead-cuts-that-last
