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

Account of buisness - Assignment Example1). Both study results form a basis for discussing and analysing whether ABC can work for smaller businesses as they forsake the conventional cost system. The following paper discusses whether SMEs are ready to adopt the activity based costing system as an effective tool to succeed 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 finished cost savings, the popularity of ABC amongst corporations is worth noting (Fladkjr 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 Fladkjr and Erling Jense n, SMEs seldom implement the ABC system due to two primaeval 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 (Fladkjr 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 send back behind corporations (Joo 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 subscribe to factors that affect a business ability to apply new expertise. These factors are organisati onal willingness, fiscal