ACC 349 Week 3 Individual Assignment Article Analysis Summary

This article explains how a company called Starn Tool & Manufacturingdescribes its


owners’ experiences with activity based costing versus their old method of “flat-shop rate” job


costing and quoting.  Their method led to many variances in the past that were hurting the profit


margin by seriously underrating the costs of some of their jobs which ended up costing a lot


more than they were accounting for because of the higher overhead. They were able to zero in on


actual costs of all their jobs and correlate costs to specific jobs more accurately than just


averaging out costs of all their various jobs when giving a quote or estimate just by


implementing ABC.  By successfully implementing and switching to ABC, the company was


able to double its profit margins that it was experiencing in the 70’s and 80’s. Also, the company


hasdeveloped its own ABC software and sold it to its close competitors because as they said


“…having strong competitors is a good thing.”





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