Read the article, Information Usefulness and Usage in Business Decision-Making: An Activity-Based Costing (ABC) Perspective(the article can be located via the LIRN in GAP). In a 4 to 6-page written report, address the following questions:
1. Job order manufacturing and process manufacturing are two major costing systems used in manufacturing. Answer the following questions regarding these two systems:
a. Compare and contrast the two costing systems.
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b. Which costing system should a service firm, such as an advertising agency use?
c. How do these two systems provide decision-making information?
2. Describe activity based costing.
Give two examples where activity based costing is preferable over traditional costing.
a. How is activity-based costing useful for decision making?
b. Discuss the three overhead rate methods used in activity-based costing and consider their relative usefulness.
International Journal of Management Vol. 29 No. 1 Part 1 Mar 2012 19Information Usefulness and Usage in Business Decision-Making: An Activity-Based Costing (ABC) PerspectiveNur Naha Abu MansorUniversity Technology of Malaysia, MalaysiaMichael TaylesUniversity of Hull, United KingdomRichard PikeBradford University, United KingdomActivity-based costing (ABC) an information system developed in the 1980s to overcome some of the limitations of traditional cost accounting and to enhance its usefulness in strategic decision-making. The objective of the study is n fi d out how managers feel about activity-based costing, especially how useful they believe it is in providing information and in helping them to make better decisions. Data was collected by means of an e-mailed questionnaire sent out to 181 ABC users consisting of executives at a large telecommunication company in South East Asia. ABC users were asked 24 items which assessed their perceptions of the information usefulness and effects on decision making of ABC usage. Descriptive analysis on the firm’s experiences with the usefulness of ABC information in different business processes and how ABC information changed decisions is presented. Respondents’ were asked to indicate the significance of changes made as a result of ABC site implementation. Using this measure, when an ABC implementation causes a strong change in decisions, it is viewed as being successful; when it causes less change in decisions, it is viewed as not being successful. It also reports on the organisation’s usefulness of ABC information in different business processes. By viewing an ABC system as an enabler to improve the operations business processes and decisions, it demonstrates that these systems enable executive and managers to enhance the process of decision-making. The study found ABC provided better information in areas of budgeting and planning and opportunities for improvement in other business areas. In…