Question

ABC in Real Companies

Choose a company in any of the following categories: airline, florist, bookstore, bank, grocery store, restaurant, college, retail clothing shop, movie theater, or lawn service. In this activity, you will be making reasonable estimates of the types of costs and activities associated with this company; companies do not typically publish internal cost or process information. Be reasonable in your cost estimates and include your assumptions used in selecting costs.

Basic Discussion Questions

1. Describe the company selected, including its products or services.

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2. List eight key activities performed at this company. Choose at least one activity in the areas of production, sales, human resources, and accounting.

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3. For each of the key activities, list a potential cost driver for that activity and describe why this cost driver would be appropriate for the associated activity.

Answer 1

1.

Organization: Book store

Products: Books and other products

Additional benefits: Book signing and book clubs

2.

Eight key activities of the company:

Areas to be included:

Production, sales, human resources, and accounting

1. Customer purchase process

2. Special order processing

3. Customer inquiry handling

4. Appoint and guide a new employees

5. Creation of stock shelves

6. Event advertising

7. Cash registers to be closed on daily basis

8. Recording everyday transactions

3.

Potential cost driver for each activity:

1. Rate of customer sales

2. Refer special orders

3. Customer inquiry

4. Training sessions

5. Packages to be delivered

6. Events scheduled

7. Cash registers

8. Hours used by Bookkeeper