ACC 560 Assignment 1 Activity-based Costing in Service Industries(USE AS GUIDE ONLY)

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Activity-based Costing in Service Industries
Assignment #1: “Activity-based Costing in Service Industries”
ACC 560
Activity-based Costing in Service Industries
McDonalds USA is a company which implements ABC costing in a very deep way and it
uses the e-commerce activities throughout the world. The founder of McDonalds is Ray Kroc.
They have entered into this career in California first with a small restaurant in 1955. The motto
of McDonalds is to serve the people with the best food qualities their favorite and delicious food.
Their value in action is none of us is as good as all of us.
During the 1950s the limitations of traditional product costing systems began to be
widely publicized. “These systems were designed decades ago when most companies
manufactured a narrow range of products, and direct labor and materials were the dominant
factory costs”(Ligy V. K, 2009). Goetz advocated ABC principles first. ABC costing can be
implemented in McDonalds in the following way:
First, they need to identify the chosen Cost Objects (product, service or customer). For
example they have selected their product to implement ABC costing on it. Their product is
burger. Secondly, they need to identify the Direct Costs. Some examples of this are prime cost of
the products for service or he customer. In this case potato will be considered as its direct cost.
The next step is to select the Activity Bases or Cost Driver. In this case it will be the number of
order placed of all types of potato products in a day. Then you must identify the costs associated
with each activity in the Cost pool. In this case it is the amount of days. You must then compute
the rate per cost driver. Then you must compute the indirect costs of the products. The formula
for this is the activity for the product multiplied by rate per driver. Lastly, we must compute the
total costs of the product which is equal to direct costs + indirect costs.
The benefits that the company will get from this ABC based costing are as follows:

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Course: ACC 560 Assignment 1 Activity-based Costing in Service Industries(USE AS GUIDE ONLY)
Subject: ACC 560 Assignment 1 Activity-based Costing in Service Industries(USE AS GUIDE ONLY)
Subject code: ACC 560 Assignment 1 Activity-based Costing in Service Industries(USE AS GUIDE ONLY)
Year of study: 17-18
Document
Section: Homework & Assignments
Made on: 28-01-2020
Type: .pdf
Pages: 8
Language: English
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ACC 560 Assignment 1 Activity-based Costing in Service Industries(USE AS GUIDE ONLY)