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12 Problems: Inappropriate cost allocating method Overhead @300% of direct labour costs Reasons Usage of overhead activity is not in proportion to the volume of output Wrong cost drivers for overhead expense Implications Causes Misleading Profitability Analysis Inappropriate Pricing Decision Ineffective cost management Problem
24 Implementation- Master Plan Change volume base costing to activity based costing High Increase the price of Flow Controllers 0.5 years Reduce the cost of non-value added activities Medium Reduce the price of valves and pumps if price competition occurs 1 year Low Time from Today 1.5 years +
27 1. US Government Info: Bush Tax Cuts: It's Your Money http://usgovinfo.about.com/library/weekly/aa010201a.htm
2． Bureau of Economic Analysis, Department of Commerce http://www.bea.gov/newsreleases/national/gdp/2000/gdp200a.htm 3. Gross Domestic Product by Industry for 1998–2000 http://www.bea.gov/scb/pdf/2001/11november/1101gdpxind.pdf References