Activity-based costing (ABC) in service industry

Activity-based costing (ABC) in service industry Essay example
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Finance & Accounting
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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…

Introduction

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, Amazon.com. 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. ...
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