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article review for managerial accounting - Assignment Example
Finance & Accounting
Pages 3 (753 words)
Name: Instructor: Course: Tutor: Date: Article review for managerial accounting The article by Srikumar Rao titled “Overhead Can Kill You” basically describes events that can make a company incur losses. It generally discusses the decisions that a company can take in order to make profits by properly allocating costs and labour…
This is because some of the expenses can be reduced by use of direct labour instead of using machines. The allocation of overhead does not only lead to faulty choices in a business, but it assists managers to know which products to continue producing and which it should stop producing. This has been further elaborated by the use of Activity Based Accounting (ABC), which basically shows how to deal with cost allocation of items sold to big and small customers. This way, the management is able to make decisions in the best way to serve their customers. For instance, in the TTI case, the company had to walk away from the old way of doing things and make sure that each and every customer was satisfied. The large customers as well as small customers were given an option of ensuring that they get many goods but also get fair prices that will enable them to make revenues. This not only benefited the customers, but it also helped the company grow and make substantial returns. ABC is also used to assist in eliminating unnecessary activities as well as unprofitable production line that cause extra overheads. The cartoon shows one person enjoying a meal at the expense of the other three who will also foot the bill as per the portion allocated. ...
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