Consequences of ABC Analysis

Activity Based Costing
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Sharon

Consequences of ABC Analysis

If Activity-based Costing has been correctly implemented, and it turns out a product is causing losses, does this mean automatically that the product should be discontinued?

  vijay
 

activity based costing

The product should not be discontinued.
To produce that particular product (in spite of loss) could be a strategic decision. For example, you get order for say 5 products which includes the 'loss making' product. The order says you supply all or nothing. Now, if the order, taking in to account all 5 products, is profitable then it makes sense to produce and supply the 'loss making' product.
Same logic can be extended to a profitable customer also. In order to retain him and earn profit on sales to him at the end of the year, you might have to sell the 'loss making' product along with other profitable products.

  Jake
 

Loss-making products

Agree with Vijay: there can be strategic or other (...)

  Simon
 

Loss-making products

Firstly one should never make the fatal mistake an (...)

  Kostadin Nedyalkov Krastev
 

Analysis

Conversion costs are constraining the product mix. (...)

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