Managerial Accounting for Apple Inc. Activity Based Costing
Activity based costing is given costs to products and services depending on the activities that the production uses and the resources that are utilised by these activities. It helps in determining the exact costs of the products or services. Apple Inc. uses the activity-based costing method to value its products.
The method of activity based costing method that Apple Company uses is activity based management. ABC provides the management with the necessary information that it uses for its decision making and planning. The control Apple uses the ABC approach to making decisions about it final pricing of it products. Also, the management can add or delete information from the product portfolio. The activity also helps the company to choose the best line of production that different products can use. The management of Apple Company uses the operation to identify the main steps in the manufacturing process. It then classifies all the in groups depending on the hierarchy of their costs. The next step is the finding the total sum of all the costs. Then, the management calculates the values of costs drivers and activity rate that are applicable. Lastly, the cost of each activity is applied to the final product. (Jameson, 2000)
This type of costing method is appropriate because it increases the manufacturing overhead costs and limits their correlation with the direct labour inputs and machine working hours. It also helps diversify the products and customers tastes. Lastly, it helps control the rate of production of different products. For instance, some products are produced in significant quantities while others in small amount depending on the activities and resources involved.
This method makes it easy to analyse data. The company is Apple to monitor all the costs of its operations from the beginning of the production process to the time the product reaches the final customer. Also, it can give a clear indication of the customer reactions to the costing system the company uses.
Jameson, J. (2000). U.S. Patent No. 6,032,123. Washington, DC: U.S. Patent and Trademark Office.