Glaser Health Products Essay

Glaser Health Products of Ranier Falls, Georgia ineluctably assistance in evaluating and classifying equals in consecrate to implement an action at law-based cost brass. As stated in the case, these cost provide be apply for planning and control decisions earlier than inventory valuation. The activity-based cost schema give provide purify allocation of Glasers budget items be quite than a system to look at the cost device drivers or the activities that their command operating expense costs comprise. Glasers general structure of an activity-based costing model should consist of cost objects, activities, consumption of resources, and cost. Activity-based costing changes the rules of the game since it changes whatsoever of the key measures that conductors uptake for their decision making and for evaluating individuals performance (Accounting4 counselling.com). In order for Glaser to implement a successful activity-based costing system management must take a look at t heir overhead costs and dislodge whether or not they have enough overhead to be badgering about. While we do not know Glasers m wizardtary apprize of their overhead costs, it seems that they have several divisions with a large amount of cost categories management must consider.The three main divisions of Glaser Health Products are Operations, Sales, and Administrative. low each division are costs categories that have been divided up to help management determine where they belong. (Appendix A identifies each of the costs with the becharm division). Next, management must identify the big overhead cost in order to determine whether or not they want to allocate some or a bunch of overhead using the activity-based costing system. I suggest that Glaser creates an activity-based costing system that allocates, with a minimal amount of effort, a large portion of their overhead. For instance, management is correct in identifying each of the costs using iv different activities. These incl ude unit-level activities, batch-level activities, product-level activities, and facility-level activities. This is a great system because the fewer activities Glaser can use to do this, the easier the accounting will be for management.These four activities will allow Glaser to fairly and accurately allocate overhead to product lines. (Appendix B illustrates each of the costs under one of the four activities and also classifies the four activities under one of the three divisions). After Glaser management has identified the handful of the activities that connect overhead expenses to products, they must use the take over measure (the cost driver) to tie the overhead expenses to the product lines or good lines. To achieve this management must specify an assume cost driver for tracing costs associated with the various levels of activities to the next cost objective or products. The cost drivers can include a number of things such as direct labor hours, number of batches, or numb er of employees. (Appendix C shows the appropriate cost driver with the various levels of activities).Under the Activity-based costing system, Glaser will use foregoing stage cost drivers to link costs of resources consumed in one activity center to other activity centers. Some costs, such as batch-level activity center costs are initially assigned to a primary stage activity center and only need a single assignment process, and are traceable to specific products but oft use a cost driver. Product-level activity center costs may be related to a specific product or grouped by activities before being assigned to products at the primary stage. Facility-level activity center costs may go through multiple foregoing stages before being assigned to products (Schneider, 2012). It is necessary to use a preliminary stage cost driver because this system assigns costs from activities to other activities.On the other hand, primary stage cost drivers is apply to assign costs from activities to the cost objectives. This process eliminates distortions in cost allocations to products that result from production complexness (Schneider, 2012). Actually sitting down and laying out an activity-based costing system for a real company is much more difficult than a typical textbook rudiment problem. Determining what causes a cost to descend is much more difficult than it originally might seem (Krupnicki & adenylic acid Tyson, 1997). Overall, I think that managements decision to implement an activity-based costing system is going to work in their favor. The decision to implement ABC is often driven by the need to improve customer profitability analysis, to gain more accurate cost information for pricing or to prepare relevant budgets (Cohen, Venieris, & Kaimenaki, 2005).In this case, Glaser wants to identify costs used for planning and control decisions rather than for inventory valuation. Glaser is likely to see umteen benefits from implementing an activity-based cos ting system such as better profitability measures, better decision-making, process improvement, cost estimation, and cost of unused capacity. The activity-based costing system will provide better allocation of Glasers overhead costs rather than a system to look at the cost drivers or the activities that their overhead costs comprise.Referenceshttp//www.accounting4management.com/implementing_activity_based_costing.htm Schneider, A. (Ed.). (2012). Managerial Accounting Decision Making for the Service And Manufacturing Sectors. San Diego, CA Bridgepoint Education. Krupnicki, M., & Tyson, T. (1997). Using ABC to Determine the Cost of Servicing Customers. direction Accounting, 79(6), 40-46. Retrieved from http//search.proquest.com/docview/229739140?accountid=32521 Cohen, S., Venieris, G., & Kaimenaki, E. (2005). ABC Adopters, Supporters, and Deniers And Unawares. Managerial Auditing Journal, 20(8), 981-1000. Retrieved from http//search.proquest.com/docview/27453714?accountid=32521