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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