Activity based costing method, in this method organizations estimate the cost of a certain product or service by adding the individual costs of all other assets that have contributed in making one product or service. These costs include manufacturing costs, selling costs, and general and administrative costs. This technique is very helpful in determining correct costs, ultimately corrects prices because it distinctly shows the contribution of all the assets, and accordingly sets the prices. This can also be helpful in allocating resources, determining wages and salaries of employees and making capital budgeting decisions. Capital budgeting decisions are the investment decisions using which organizations invest in the projects that possess a superior return on their investment that is a return on the cost of capital and add value to the organizations.
Moreover, ABC method also helps in determining most profitable and least profitable customers, products, services, raw materials, and areas. It can identify the components that contribute to improving the financial performance and the ones that become a hindrance in improving the performance. Gwent can take a huge advantage of this method and work efficiently in the crisis. It can identify the factors that consumers do not like about the houses and cut the costs of those factors. For example, in the current era, people do not like over decorated and colorful houses rather go for simple ones. If Gwent is spending more on different colors and decorations, it can cut these costs. because these expenditures do not add value to the organization. With this cut down there will be a decrease in the wages of labors working on decorations and other such stuff. It can also make a cut down in the raw material by taking help of commodity and future markets. If organizations implement this method, it also motivates its employees and labors to work more as their salaries will depend on the contribution they make in making the final products (Cooper & Kaplan, pp. 130-135, 1991). It will indirectly increase the efficiency and productivity of employees. Moreover, Gwent should properly analyze the backgrounds of people before giving them flats on rent, that after four years would they be able to buy the flat. As if they do not buy it and leave it, Gwent will have to invest on the flat again to renovate it so that they can give it on rent. If tenants buy the flat, it reduces the cost of renovating the house. This technique is a part of ABC method as it adds value and reduces costs. It also provides builders with cash, which