Account of buisness Assignment Example | Topics and Well Written Essays - 1250 words

Account of buisness - Assignment Example 1). Both study results form a basis for discussing and analysing whether ABC can work for smaller businesses as they abandon the conventional costing system. The following paper discusses whether SMEs are ready to adopt the activity based costing system as an effective tool to achieve the desired level of cost savings and efficiency. First, ABC is not very popular amongst corporations today. Considering many SMEs follow the operational trends of corporations with the intention of reaching their levels of success through cost savings, the popularity of ABC amongst corporations is worth noting (Fladkjà ¦r and Jensen, 2011, p. 3). According to CIMA, ABC is a strategy for the costing and monitoring of activities that entail drawing resource usage and costing final products. Corporations assign resources to activities, and activities to cost items based on usage approximations (Chapman et al., 2011, p. 669). According to Henrik Fladkjà ¦r and Erling Jensen, SMEs seldom implement the ABC system due to two key reasons. First, ABC is very hard to apply. Second, the data basis for ABC is not accessible in the needed quality in ERP systems used by SMEs (Fladkjà ¦r and Jensen, 2011, p. 21). A highly competitive global economy contributes to SMEs’ readiness to implement ABC. A competitive economy compels SMEs to lower the price of their commodities or services by raising output, improving product or service costing, or both. Challenges related to the shift from traditional costing systems to ABC cause rates of adopting ABC to lag behind corporations (Joà £o and Machado, 2012, p. 179). Researchers Owen Hall and Charles McPeak note these challenges as the cost of applying ABC, approximating the advantages of the ABC system, and incorporating ABC into the general management outline. As a result, the Hall and McPeak recommend SMEs to consider factors that affect a business’ ability to apply new expertise. These factors are organisational willingness, fiscal