Activity-based costing (ABC) in service industry Essay

Activity-based costing (ABC) in assistance industry - Essay causaHowever, it has often been argued that implementing such pricing strategies might prove to be quite challenging in case of service oriented companies in comparison to the harvest rendering companies owing to the greater involvement of intangible assets and liabilities. In this regard, various models have been developed with the intention to assist in determining the accurate cost incurred in following the entire process of delivering services to the ultimate customers. For instance, Activity Based Costing (ABC) can be regarded as an effective cost intent system that involves breaking up of the activities or the processes into individual activities (Shevasuthisilp & Punasathitwong, 2012). With this concern, this essay intends to present a brief overview of the ABC concept with reference to the business process execute by a large-sized service marketing confederacy, Amazon.com. The discussion will thus address the be nefits of time-driven ABC system for the selected service company along with the corresponding rivalrous advantages to be attained by the organization. The potential impact of such costing system will further be evaluated in the context of e-commerce based service company comp atomic number 18d with that of the traditional system. Company Overview Amazon.Com, Incorporation was established in Washington, USA in 1994. The company primarily renders its services to its versatile customer range through retail websites. The company is one of the earliest service based organizations involved in e-commerce or the sale of various merchandise through e-commerce. Contextually, the online retail act of the company is considered to be the core business activity of Amazon.com. The vision of the company depicts that Amazon.com intends to provide high quality services to its customers. The customers services operations of the company plant internally and externally managed contact centers. The company further provides programs that allow sellers from around the world to market their products through Amazon.com offering its customers to access in-the-cloud infrastructure services. Furthermore, it has been sight that the company generates its revenues from online advertisements and other promotional activities. Notably, the recent activities of the organization reveal that even in the circumstances where its rivals are struggling with their survival in the market place, the company is thriving, boasting increasing revenue (Morningstar, 2009). Implementation of Time Driven ABC Costs System and Related Benefits (Amazon.Com) ABC cost system includes grouping of substantiating costs on the basis of processes and certain activities performed within the value chain system of the company. Furthermore, these indirect costs are allocated to services rendered to the customers, proportionately to the volume of activities that gave near to these indirect costs rather on the entire d epartments. However, many problems have been found to be associated with the implementation of ABC model such as complexness issues, time-consuming technique and other problems related with the modification of the model. Contextually, time driven ABC involves time as the primary cost driver. Under this system, costs are directly allocated to costs physical objects (Roztocki, 2010). At the initial step of time driven ABC system implementation, Amazon.com should critically determine the major purposes for implementing the procedure. The most common objective for implementing the ABC system is to gain efficiency in controlling the overall costs taking into account the overhead costs in measuring the positivity of the company. Contextually, overhead costs related with Amazon.com include rent, office expenses,