Essay on Case East Penn Bank

Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.

The week four individual paper addresses the implementation of Activity Based Costing (ABC) by Super Bakery, Inc., a virtual corporation founded by Franco Harris. Specifically, management strategies, the reasoning behind an ABC system, and the alternatives of a job order cost system or a process order cost system are assessed for this enterprise.

The week four individual paper addresses the implementation of Activity Based Costing (ABC) by Super Bakery, Inc., a virtual corporation founded by Franco Harris. Specifically, management strategies, the reasoning behind an ABC system, and the alternatives of a job order cost system or a process order cost system are assessed for this enterprise.

Activity-based costing is a system of accounting that puts emphases on activities performed to produce products or services (Schneider, 2012). In this costing system every activity is assigned a cost (Schneider, 2012). The goal of activity-based costing is not to allot common costs to products but to measure and then price out all the resources used for activities that sustain the production and delivery of products and services to customers (Mazumder, 2007). Activity-based costing is a cost system that is useful in business because of the fact that it does account for the cost of the products, resources used to produce the product and delivery of the product.

The issues arising from such a system is the amount of data collected, the operational system in place gathering the data and the quality of that data. For example, in order to precisely identify costs related to a customer the bank should use the activity-based costing methodology, that will assign the costs of all activities of the customer towards the bank (products and services) and assign those costs to the actual consumption of each product and service. Such measurable data could be the income derived from interest paid on outstanding credit balances and loans, the fees paid by the customer, the risk score and the bank’s overhead towards the customer. In order to assess this data – usually they are suppressed in a computerized system that no one can use entirely – one should identify the specific measurable parameters. The bank will have to allocate resources for this task but it will pay off eventually. The data inputs will lead to product / service level metrics and will help the bank assess the profitability of each

Activity-based costing (ABC) methodology is an instrument designed to provide accountants and managers with valuable costing information that will allow them to make sound strategic decisions. It is used as a secondary methodology rather than a replacement for the company’s primarily costing system. The ABC methodology identifies activities in an organization and for each activity it assigns a cost. The cost reflects the actual resource consumption by each activity that has been identified.

The Great Western Bank of San Diego placed an order of 12 special purpose accounting machines with the Data Max Corporation of Cincinnati, OH. Great Western Bank and Data Max, both agreed to a firm-fixed price of $9,500 per unit and FOB the shipping point. The purchasing manager of the bank designated a particular carrier (yellow freight) and Data Max returned the signed acknowledgement without making any changes to the terms and conditions.

An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx,

We will examine the given data from the case and compare the unit costs from the company’s current costing system (traditional costing) and from activity-based costing. We will also highlight other qualitative data in consideration with the numerical factors that may result to a significant change on our recommendation.

Nowadays, we know that activity based costing system assigns overhead costs to products or services products that using a two-stage process, which focuses on activities. ABC is a relatively new and very important topic in managerial accounting. ABC allows us to find a way that we could determine the profitability of every product, profitability of every customer we serve, and the profitability of our process. Contents in brief, first that comparing potential advantages of ABC versus traditional costing methods. The

Activity-based management, activity-based costing and continuous improvement, all these help in the improvement of the efficiency in manufacturing, better control of overhead costs and the accurate costing of products. With this in mind, We disagree with the advice that Chuck Davis, the firm’s controller, gave Leonard Bryner. The traditional way of costing produce average costs that severely overstated or understated. Without the accurate costs, the firm would not be able to price properly their products and that would be damaging to the firm. With activity-based costing and management, all costs are accounted for with the help activity-drivers and overhead costs are decreased. In turn, the costs that the firm has for their products are more accurate and pricing is much easier.

In 1996, Citibank was an emergent banking institution attempting to increase its market share in the competitive Los Angeles area. In order to do so, the bank’s strategy was to focus slightly less on their financial growth, and much more on providing “a high level of service to its customers”. Management viewed this paradigm shift as “critical to the long term success of the franchise”.

candidates for ABC. One reason for this is that in the services industry a great

The project sponsor (John Hart) had extensive industry experience and had identified the need for a corporate marketing database to target the corporate customers who brought in the majority of the revenue and profit for FNB. This new database was proposed in order to consolidate information from three different banking divisions –

If the banks strategy was cost cutting instead of supporting customer service the banks whole strategy would be very different. The bank would try to cut cost everywhere such as the tellers in the drive through lanes may be replaced with automatic machines. Customers would be encouraged to use banking on line as again the bank could reduce the number of workers which would cut the staffing costs. When competing on cost organisations my invest in automation to reduce unit costs, use lower skill labour and limit product range and offer little customisation. (Class Notes – Chapter 2, Operations Management)