The paper "The Cost of an Individual and Business Return " is a great example of a finance and accounting assignment. The estimates will be very useful to the company, they will indicate in detail the areas the company is incurring more costs as well as spending more time. The two main things with the company are spending a lot of time on some clients and incurring unnecessary costs from the returns. The estimates will improve the costing system such that the costs per client will reduce significantly. The time spent per client will reduce substantially.
All the time spent on the returns requiring clarification will be used to work on new clients. This will improve efficiency; lack of efficient costing system is the biggest area that is making the company to experience poor profitability. Therefore, the estimates will improve the efficiency of the costing system; it will reduce the time spent on one client thereby freeing time for the employees to work on new clients(Gosselin 2006). The pricing system of the company will be overhauled; the current pricing policy does not consider the time spent on a single client.
However, the estimates will change the pricing policy will be changed; the clients will be charged depending on the time and cost spent on their work. This will change the pricing policy completely. Advantages and Disadvantages of Activity Based Costing Activity-based costing is a method of allocating direct expenses and overheads that are related to the most important activities of a company. This allows the company a chance to better define the areas of the business that generate the most income and profit for the company.
The company will be able to classify its inventory in the order of profitability to the firm (Kaplan & Anderson 2013). One of the most important advantages of ABC is that it is a better control tool for high priority inventory. The company is getting a lot of business from small businesses than from individuals, as such; this is the best method to use to control the high priority inventory from the small businesses. It will help the company and especially Katrine Pedersen who is responsible for investigating the low profitability of the company despite the huge backlog of work.
She will be able to place tighter controls as well as more frequent controls on the company high priority inventories. These are the inventories that the customer’ s request most and they are most common. This will help the company to avoid many returns for clarification. As the small business represents the biggest margin of the company profitability, using this method, Katrine Pedersen will be able to monitor the demand from them and hence ensure that the stock levels match demand.
She will also use the company resources to prioritise control of high sensitive clients that has a lower impact on the bottom line of the company(Kaplan & Anderson 2013).
Askarany, D., &Yazdifar, H, 2007, Why ABC is not widely implemented:International Journal of Business 7(1).
Askarany, D., Yazdifar, H, &Askary, S, 2010, Supply chain management, activity-based costing and organisational factors: International Journal of Production Economics, 127(2), 238-248.
Gosselin, M, 2006,A review of activity-based costing: technique, implementation, and consequences: Handbooks of Management Accounting Research, 2, 641-671.
Kaplan, R, & Anderson, S, R, 2013, Time-driven activity-based costing: a simpler and more powerful path to higher profits; Harvard business press.
Krishnan, A, 2007,an application of Activity Based Costing in higher learning institution: A local case study; Contemporary Management Research, 2(2), 75.