Acc 349 Wk#3 Article Analysis

886 WordsMay 16, 20134 Pages
Article Summary The article that I have chosen for Wk#3 Analysis is Cost-System Redesign at a Medium-Sized Company: Getting the Right Numbers to Drive Improvements in Business Performance by David E. Stout, PH.D., and Gregory P. Bedenis, CPIM. Intrigued by the name I began to read the article and was surprised to hear that an established manufacturing company was experiencing cash-flow difficulties and unprofitable growth. Since the founding of company XYZ (name in article) they have had a competitive advantage of low overhead cost and high customer service, this is translated in a customer’s mind as where I can get taken care of and a good value. However with changes in the market some internet direct distributors have moved into the playing field and now the completion. The continued success had been experienced was now a thing of the past and the owners wanted to know why. Under the current system it was decided that poor inventory management, lack of control of overhead costs and inefficient business process were the problem areas. It wasn’t until a plant manager completed an MBA course in management accounting that an idea sparked in him to use an activity-based costing system at XYZ. After the initial the redesigning to accommodate the ABC system the model was ready to go. Moving from how most common accounting systems view resources cost grouping as gathered in function or descriptive accounts now they are devoted to the performance of activities. After being able to examine data they have never been able to see before there were several recommendations that surfaced in the area of improving cash flow and for maximizing ROI across cost objects. One of these recommendations consists of the use of common components. The data revealed that in their family of products reduction in inventory investments could be reduced by $132,000.00 by adapting this

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