StudentShare solutions
Triangle menu

Activity-based costing (ABC) in service industry - Essay Example

Extract of sample
Activity-based costing (ABC) in service industry

However, it has often been argued that implementing such pricing strategies might prove to be quite challenging in case of service oriented companies in comparison to the product rendering companies owing to the greater involvement of intangible assets and liabilities. In this regard, various models have been developed with the intention to assist in determining the accurate costs incurred in following the entire process of delivering services to the ultimate customers. For instance, Activity Based Costing (ABC) can be regarded as an effective cost determination system that involves breaking up of the activities or the processes into individual activities (Shevasuthisilp & Punasathitwong, 2012). With this concern, this essay intends to present a brief overview of the ABC concept with reference to the business process executed by a large-sized service marketing company, The discussion will thus address the benefits of time-driven ABC system for the selected service company along with the corresponding competitive advantages to be attained by the organization. The potential impact of such costing system will further be evaluated in the context of e-commerce based service company compared with that of the traditional system. Company Overview Amazon.Com, Incorporation was established in Washington, USA in 1994. The company primarily renders its services to its versatile customer range through retail websites. The company is one of the earliest service based organizations involved in e-commerce or the sale of various merchandise through e-commerce. Contextually, the online retail operation of the company is considered to be the core business activity of The vision of the company depicts that intends to provide high quality services to its customers. The customers’ services operations of the company comprise internally and externally managed contact centers. The company further provides programs that allow sellers from around the world to market their products through offering its customers to access ‘in-the-cloud infrastructure services’. Furthermore, it has been observed that the company generates its revenues from online advertisements and other promotional activities. Notably, the recent activities of the organization reveal that even in the circumstances where its rivals are struggling with their survival in the market place, the company is thriving, boasting increasing revenue (Morningstar, 2009). Implementation of Time Driven ABC Costs System and Related Benefits (Amazon.Com) ABC cost system includes grouping of indirect costs on the basis of processes and certain activities performed within the value chain system of the company. Furthermore, these indirect costs are allocated to services rendered to the customers, proportionately to the volume of activities that gave rise to these indirect costs rather on the entire departments. However, many problems have been found to be associated with the implementation of ABC model such as complexity issues, time-consuming technique and other problems related with the modification of the model. Contextually, time driven ABC involves time as the primary cost driver. Under this system, costs are directly allocated to costs objectives (Roztocki, 2010). At the initial step of time driven ABC system implementation, should critically determine the major purposes for implementing the procedure. The most common objective for implementing the ABC system is to gain efficiency in controlling the overall costs taking into account the overhead costs in measuring the profitability of the company. Contextually, overhead costs related with include rent, office expenses, ...Show more
Cite this document
  • APA
  • MLA
(“Activity-based costing (ABC) in service industry Essay”, n.d.)
Retrieved from
(Activity-Based Costing (ABC) in Service Industry Essay)
“Activity-Based Costing (ABC) in Service Industry Essay”, n.d.
  • Cited: 0 times


In today’s highly competitive business environment both in the contexts of product as well as service industries,companies have been observed to continuously strive for marketing the commodities at a reasonable price…
Author : keiraledner
Download 1
Activity-based costing (ABC) in service industry
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Activity-based costing (ABC) in service industry"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Activity-Based Costing: Is It Still Relevant
This article is based on the research conducted about the relevance of activity based costing method and its benefits. However the article overlooks some of the important disadvantages of this costing system. In their research, employees at all levels were considered as respondents. Respondents of this research included executives, senior managers, directors, analysts, managers and other designations.
11 pages (2750 words) Essay
Activity based costing
The main objective of this type of system is proper identification of all cost categories and using basing decisions on this information. Most organizations that use ABC systems have two costing systems – the official costing system that is used for preparing external financial reports
6 pages (1500 words) Essay
Activity Based Costing
Based on the activity based costing (ABC) method, the company should increase the number of department stores, as part of its expansion strategy (Chakraborty, 2004). This is because, unlike the direct simple costing method, the activity based costing (ABC) has a higher level of accuracy.
4 pages (1000 words) Essay
Product Costing
..6 Weaknesses and strengths…………………………......7 Absorption costing in the public sector………………...8 Conclusion ……………………………………………..9 List of references……………………………………….10 Essentially absorption costing refers to the means through which all the manufacturing costs are engrossed by units produced.
7 pages (1750 words) Essay
Activity Based Costing
Activity Based Costing (ABC) is a common procedure normally most of the organizations adopted to determine the price of their products or services. Both indirect and direct costs of manufacturing will be considered while calculating the unit price. This method proved to be an effective way to determine the true cost of a product or service.
10 pages (2500 words) Essay
Activity Based Costing
Accountants have always paid close attention to costs, since this variable provides a basis that is utilized throughout the entire accounting information system. In a manufacturing firm labor and materials have always been cost
7 pages (1750 words) Essay
Activity-based costing (ABC) in service industry
er, it has often been argued that implementing such pricing strategies might prove to be quite challenging in case of service oriented companies in comparison to the product rendering companies owing to the greater involvement of intangible assets and liabilities. In this
6 pages (1500 words) Essay
1.Absorption and Marginal costing/2.Activity Based Costing and Traditional Costing /3.Target Costing and Cost-Plus Approach/4.Budgeting as a Performance Evaluation Method
cost (also known as full costing) is costing systems which includes direct materials, direct labour and variable and fixed manufacturing overhead as product cost (Duruy, 2011).This costing method is normally required for external reporting purposes under GAAP since accountants
3 pages (750 words) Essay
Activity-based-costing (ABC) in practice - the factors affecting the successful implementation of an ABC system
Unlike the traditional method, ABC does not measure the utilization of production volume as the basis of absorption during calculation of overhead costs. It traces the overhead costs of the products by focusing
8 pages (2000 words) Essay
Discuss how asmall UK education-sector organisation might use ABC (activity based costing) to (a) produce product costs for services, and to (b) evaluate the internal efficiency, quality and profitability per product or service line. Both benefits and d
ABC is based on the concept that every output needs certain activities, and each activity needs certain sources (Kaplan & Steven, 2013; Garrett, 2014; Bhimani & Bromwic, 2009). It follows a two-step process through which cost of resources is assigned to activities in the first
10 pages (2500 words) Essay
Comments (0)
Click to create a comment
Let us find you another Essay on topic Activity-based costing (ABC) in service industry for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us