UPS Company Activity Based Coasting

Document Type:Thesis

Subject Area:Accounting

Document 1

This management system traces the cost through those activities which are performed on the cost objects this way it results to much more decent, traceable and accurate cost information. The ABC system is applied in companies which have operations for manufacturing processes as well as companies that give services. It’s important to note it that, ABC system is crucial for the organizations that employ the processes and activities in the conversion of capital and the resources to products and services, quantifying as well as identifying the cost of these processes. Reviewing the activities which are based on the ABC model advantages and disadvantages gives an explanation of the many uses and the benefits of the model which has helped in the transformation of the United Parcel Services in the accounting information management by eliminating the costs allocations and allowing measurement.

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Table of contents 1. Reference……………………………………………………………………. 0 Introduction Activity Based Costing is a methodology in accounting which is usually used to assign the extent of resources accurately which are consumed and the extra costs that is incurred in the production of a service or the product on the value adding activities basis. Activity Based Costing is therefore defined as the collection of all the operations and the financial information performance which traces the important activities of the firm in the production of costs. This report aims to discuss the reasons why the UPS-United Parcel Service Company to implement the ABC model for the improvement of its Management Accounting information system to its tom administration team. 0 Background Activity Based Costing was developed by Kaplan and Cooper in the Harvard School of Business.

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• There is a clear identification of the appropriate cost driver in tracing the overhead in a service or a product. • The pattern behavior of the cost is always dictated by the cost drivers. United Parcel Service Company developed the ABC system with the aim of supporting the existing decisions on pricing of the new produces. In addition the UPS Company used the ABC model to give a report about the reliability and the consistence of the profitability of the results by the company services and the produces as part of the company mission statement that states that “UPS to be the world’s leading package Delivery Company in providing logistics and transportation services. 0 UPS Mission Statement in Relation to ABC model For UPS Company to achieve this mission statement need to apply the ABC model in its top accounting management since ABC model highly recognizes the special testing , special engineering, machine set up as well as calculating the resource cost that has been used in every activity and assigning the activities to those products which were demanded by the activities.

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ABC model in UPS Company enhances the provision of value added services to the existing services and produces within the actual cost that is incurred. ABC System for the UPS Company Support many Current Applications 1. The measurement of performance –it views the cost as well as the profitability by the product throughout the network 2. Efforts of reducing cost- the database of the information cost for the internal cost analysis as well as the comparison 3. The pricing factor- the tool has the ability to ensure placement of the appropriate pricing. • Data collection process as well as the entrance of data requires substantial resources and keeps the cost of maintenance very high for the model of ABC does not generally conform to the principles of accounting.

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0 Recommendation • There management of United Parcel Service need to implement the ABC model strategy in order to improve its management process such as the operating activities. • For the UPS company to effectively pursue the continues improvement of its programs and the management of its activities as well as the related sources the top management need to have a better information of the costing than as it has been provided in the past by the traditional accounting system. Other than ABC model, the UPS Company can use the STANDARD COSTING technique. This accounting technique is used to record the accounting transactions at the expected cost later analyzing the differences that arise between the actual cost and the standard cost. Low. "ERP innovation implementation model incorporating change management.

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