How useful to decision makers is the process of allocating marketing and selling

Question

How useful to decision makers is the process of allocating marketing and selling expenses, design, and engineering support expenses to products? Do all companies need ABC systems? Using the Edgar database or Yahoo Finance to locate an annual report, select a firm that you believe needs an ABC system and a firm that you believe does not need an ABC system. Please post links to the annual reports with your initial post.

Firm that I think needs: Nike

https://finance.yahoo.com/quote/NKE?p=NKE

Firm I think does not need: Michelin

https://finance.yahoo.com/quote/ML.PA?p=ML.PA&.tsrc=fin-srch

Please help

Explanation / Answer

activity based costings are used by the following industries

Companies in some industries incorporate a variety of inputs into the creation of the goods or services they sell. They also factor in a wide range of expenses. When these companies can directly assign costs to the most appropriate item or activity, the budgeting and cost management at these firms greatly improve. This cost assignment serves as the basis of activity-based costing. Although activity-based costing originated in the manufacturing industry, several other industries now utilize this methodology

Activity-based costing originated in manufacturing as a better method of allocating overhead costs than the traditional method of using direct labor. With the move from labor-intensive to automation and more capital-intensive facilities and processes, manufacturing firms needed a method that better suited the new operating environment. Manufacturers use activity-based costing when overhead costs make up a significant percentage of overall expenses. Manufacturers also use it when they produce product lines of varying quantity and complexity or produce a broad array of products requiring various service support levels

In large commercial and industrial construction, many companies exhibit characteristics that warrant the use of activity-based costing. They have significant overhead, such as construction bond purchases, large equipment and machinery and skilled personnel. They also usually either have a range of complex service lines – for example, two warehouse construction projects and two office exterior renovations of different sizes – or a diverse range of projects.

For many years health care providers could simply raise their prices or offer more services to cover increasing costs. However, in recent years, Medicare, health maintenance organizations and managed care entities have capped reimbursement rates. To more closely allocate a hospital’s fixed overhead costs to those services that actually utilize a higher portion of the hospital’s resources, more hospitals began using activity-based costing.

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