act 202 assignment

8/8/2019 ACT 202 Assignment

1/10

MIS 205 COMPUTER INFORMATION SYSTEMS

Assignment

UPS COMPETES GLOBALLY WITH INFORMATION

TECHNLOGY

Section: 8

PREPARED FOR

Mirza FerdousFaculty Member

School of Business

North South University

PREPARED BY

Moin Uddin Ahmed ID# 071278030

Date of Submission: February 17, 2009

1


2/10

1. What are the inputs, processing, and outputs of UPS`s package tracking

system?

Answer:

2. Does ABC produce an accurate costing picture than traditional costing

system?

Answer:

Yes, ABC produce an accurate costing picture than traditional costing system. The reasons

are:

Product cost is more accurately measured in ABC compared to traditional costing system.

Because, in traditional cost accounting, predetermined overhead rates are computed by

dividing budgeted overhead costs by a measure of budgeted activity. This practice results

in unstable unit product costs. In ABC, the costs of idle capacity are not charged to

products in determining accurate product cost (Garrison, Noreen & Brewer, 2007-2008).

Organizational sustaining manufacturing costs are assigned in traditional costing system.

But they are not always directly related to product cost. In ABC these costs are not

assigned and thus ABC identifies product costs more accurately (Garrison, Noreen &

Brewer, 2007-2008).

2


3/10

By using traditional costing system we determine the product margin by only including

the manufacturing costs and non manufacturing costs are not included here. But in ABC

both manufacturing and non manufacturing cost that are related to product are included

and thus it determine the product margin more accurately ( Atkinson, Kaplan & Young,

2004).

In ABC customer costs are determined by customer profitability analysis which is not

done in traditional costing system (Garrison, Noreen & Brewer, 2007-2008).

3. Can you identify the activities in the University of Southampton library?

Answer:

The activities in the University of Southampton library can be divided into 2 segments:

I. Activities of service provider

II. Activities of service user

The main activities of service provider consist of the following:

Cataloguing: In this University specific skilled staffs arrange the books in a

particular order so that any type of book can be found easily.

Acquisitions: The staffs do the job of acquisition of books by using catalogue

number of each book.

Periodicals: These are kept in different section and staffs arrange them

systematically and update after specific time period.

Data preparation: Books lending and receiving data are processed by a skilled

employee and updated daily.

3


4/10

Enquiry desks: A staff sits on the desk and helps solving different problems of

customers.

Inter- library loans: Books are exchanged between different university libraries

and it is controlled by a management staff.

Archives and special collections: Library collect specific articles and collections

by using online ordering.

Attendants: An employee keeps a book to list the name of everyday attending

readers who visits the library (Goddard and Ooi, 1998).

4. Can you identify the activity cost pools for the library of the University of

Southampton and explain how these cost pools can be measured?

Answer:

The activity cost pools for the service provider are follows:

Book Processing

Periodical processing

Enquiry and consulting

Loan service

Inter- library

On-line services

Archives

The cost pools for the service user are follows:

New books processing

4


5/10

New periodicals processing

Enquiry services and consulting

Loan service cost

On- line information

Inter- library loans

Archives

Activity cost pool is a bucket in which costs drivers are accumulated that relate to a single

activity measure in the ABC system. These two cost pools mentioned earlier of Southampton

University library consists of different cost drivers which are allocated in terms of their actual

portion of activity in the particular cost pools. Thus by allocating all the cost drivers properly the

cost pool is measured (Goddard and Ooi, 1998).

In the library of Southampton the above mentioned cost drivers were identified in different cost

pools and some of them are shown below:

Cost Pools (Service Provider)

Book

Processing

Periodical

processing

Enquiry &

ConsultingLoan Service

On-line

Service

Cost DriversCataloguing Periodicals

Enquiry

desksLoan counters Librarians

Acquisitions Bindery Social Administration Online

5


6/10

science

librariansservice

Attendants Administration Electricity Attendants Electricity

( Goddard and Ooi, 1998).

5. What is meant by proxy measure over here? What are the limitations of

it?

Answer:

In this case, some cost drivers were ideal for the activities but there was lack of record forthem. But they were still included by carefully assuming the measure which is known as proxy

measure. Usually the proxy measure is selected in a way that becomes very consistent with the

activity. In this case the number of students was a reasonable proxy.

The limitations of using proxy measure are:

-The use of proxies introduces discrepancies between consumption of central resources

and the allocated change for the resources (Garrison, Noreen & Brewer, 2007-2008).

If proxies are determined inaccurately, then it can have a significant effect and thus it can

make the ABC costing system very inefficient (Morse & Zimmerman, 1997).

Number of activity and activity costs differ from industry industry, so it is really hard to

determine the proxies accurately. For example, if a factory manager is given a job to

6


7/10

measure the consumption of electricity in a library, he will surely make a mistake if he

uses a proxy measure as the consumption of electricity in a factory is much more than

the consumption in a library( Atkinson, Kaplan & Young, 2004).

6. If you are asked to implement ABC system for NSU library, how would you

start? Can you identify possible cost pools or how these cost pools can be

measured for NSU library?

Answer

First of all I went to NSU library and there a found an administrative officer of that library.

Then I asked him about the implementation of ABC system there. By his help, I was able to

identify some cost pools and cost drivers of the library.

Some of the cost pools of NSU library were:

Book Processing

Updating

Journal Processing

Loan Service

Order Process

Billing Service

7


8/10

Guiding Service

Enquiry service

Consulting Service etc.

Activity cost pool is a bucket in which costs drivers are accumulated that relate to a single

activity measure in the ABC system. These two cost pools mentioned earlier of North South

University library consists of different cost drivers which are allocated in terms of their actual

portion of activity in the particular cost pools. Thus by allocating all the cost drivers properly the

cost pool is measured (Goddard and- Ooi, 1998)

In the library of NSU, the above mentioned cost drivers were identified in different cost pools

and some of them are shown below:

Cost Pools

Book

Processing

Journal

ProcessingLoan Service Order Process

Billing

Service

Cost DriversShelving

New Journal

payment

Inter

University

loan

Administration Staff Service

Receiving Administration Loan process New order Electricity

8


9/10

By identifying and analyzing I observed that there were many similarities of activities of North

South University and Southampton University. Still visiting NSU library helped me a lot to see

some activities practically and identify the cost pools.

References:

Garrison, Noreen & Brewer, 2007-2008, Introduction to Managerial Accounting, McGraw-

HILL, USA.

Morse & Zimmerman,1997, Managerial Accounting, IRWIN, USA.

Goddard & Ooi, 1998, Activity based costing and central overhead cost Allocations in

universities, CIPFA, University of Southampton.

Atkinson, Kaplan & Young,2004, Management Accounting, Pearson Prentice Hall, USA.

9


10/10

10

act 202 assignment

Documents