Essay on Activity-Based Costing (Abc) in Service Industries

2018 Words Mar 21st, 2013 9 Pages
Activity-Based Costing (ABC) in Service Industries
H & R Block

H & R Block
A Study of TDABC Costing Robert Kaplan defines activity based costing (ABC) as a system that “provides the conceptual framework for linking financial, production, scheduling, order-entry, marketing, and sales data… into a comprehensive costing and profitability model that reports profitability by individual product, customer, and even by order. (Kaplan, 2009). Time-driven ABC has taken this methodology a step further and simplified the process to make an even more powerful tool to measure the financial effectiveness of a company. This paper is attempts to take a U.S. service company and map out an implementation of TDABC to prove the ease and
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These are the cost rate of supplying resource capacity, and the consumption of resource capacity by the activities performed by the resources. (Kaplan, 2009). Using these directions, a time driven ABC cost system could be implemented at H&R Block by first determining the different type of services offered and by assigning specific costs to that service based on its complexity and time to complete. For this paper, the services will be broken into four different activities base on the current pricing structure of the in-office services. These services are all performed by the tax professional and involve the actual preparation of the tax. The services are divided based on complexity of the tax return and consist of; 1040EZ filing, 1040 w/ standard deductions, 1040 w/ itemized deductions, complex 1040 prep, and miscellaneous selling activities. To compute the office overhead costs, we will assume that an average H&R administrative employee is paid minimum wage of $8.00, a customer service rep is paid $12.00, and a tax professional has a base pay of $20.00 per hour. In addition to salaries, the office pays $1500 in monthly rent and $3000 in supplys. All other expenses are supported out of the corporate office. Using these numbers, the total quarterly overhead is $148,860. Assuming that a small office consists of one office leader, one training administrator, and two office administrators, three of the customer service representatives and ten tax

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