Management System - East Rivers

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1) (a) What role could the Activity Based Management system play in East River’s continuous improvement efforts? Based on my understanding of the question and restricted to information available in the case only I believe that East River focused on adopting an automated system because they were not able to bid for contracts competitively. East River has invested time and money into automation process and implemented Computer-integrated manufacturing system. Then it implemented Activity Based Costing (ABC). However plant accounting staff had felt the manual system in place was adequate due to labour paced manual line was used. There is no evidence that the automation led to improve in Market share although the appendix to the case does reveal that variance in pricing through ABC estimates were far less then estimates provided by the traditional Labour-based system, when compared with Actual cost. Perhaps if adopted as Corporate Level, I think Activity Based Management (ABM) could be beneficial. The case points out that the other 3 bays of Power Service Industries are still using manual system. But at East River ABM may be able to improve efforts by: * Providing better information for all activities; * Manage activities in order to manage cost; * Improve production; * Evaluating value of processes involved in the production; * Use the ABC cost drivers to appropriately allocate cost to non-product line segments (b) Any implication for Management Accountants? Implications for Management Accountants would be: * They need to be involved. A behavioural or cultural change perhaps would be expected from them. * Management Accountants would have to learn & understand the ABM system and work towards achieving the objectives. * Management Accountants are expected to perform role of Hybrid Managers; * Management Accountants need

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