Assignment Example | Topics and Well Written Essays - 2500 words - 3

Assignment Example Through focusing on the activities instead on the departments, activity based costing allows the management which is activity based, to become an active catalyst for the improvement of product quality and business procedure reengineering (Lewis, 1995). It provides exactness in the costing process in relation to the end-customers of product, product line, the inventory-keeping units utilized by the organization and the category and channels which reorganize the product flow from the manufacturer to the end customer. This method better supports to understand the perception of the overhead costs which means allocation of widespread business resources because they are utilised by definite product lines as well as their relation towards exact cost driver (Lobo and Paulo, 1998). This method works best with up gradation and quality improvement programs. One special feature of this method is that it imitates the actual process of business, as the requisition of widespread pool resources occurs in the similar way as the common resources are utilised in the firm (Lobo and Paulo, 1998). It offers a more exact method of service/product costing, therefore leading towards perfect pricing decision. This method also increases the understanding of cost drivers and overheads; and makes non-value adding and costly activities more noticeable, thereby facilitating managers to eliminate or reduce them (Cgma, 2014). Activity based costing enables efficient challenge of the operating costs in order to find enhanced ways of assigning as well as eliminating overheads. It also supports the technique of performance management, for example continuous management (Cgma, 2014). This method will help Berry Ltd. to determine which products, resources, and services are actually increasing their productivity and which are causative to the losses. Supervisors are then capable to produce data in order to generate an enhanced budget