Crocargo Logistics Essay Example | Topics and Well Written Essays - 2250 words

Crocargo Logistics - Essay ExampleThe business has been unable to generate enough capital to accession the ultimate profitability of the firm. The fundamental problem highlighted in this case is that of an inadequate be governing body and an upcountry environment characterized by friction. The caller-out is operating in a very hostile and competitive marketplace. The costing system that is needed to support the operations of the company is totally inadequate to keep the company functional for a very long time. The current costing system has been developed by the companys operations manager who is more than satisfied with her costing system. She is not willing to take anyones assessment regarding the problems inherent in her system, as a result of which the company is not accounting for the costs it is in truth incurring. The general manger of the company has finally realized this problem and has called for an external help who would suggest a more competitive costing method. I ntroduction An activity-based costing technique is one of those techniques which enable a company to identify its costs objects more accurately. This aspect of this technique has profound implications on a business, for instance it allows a company to identify unnecessary costs, footing its returns or services more efficiently and last entirely not the least it allows a company to be more competitive in its attention. ... So it goes same(p) more the environment is competitive, more the costing system necessitate to be sophisticated. The costing system should in effect match costs with different cost objects. All these objects are integral to the ABC costing system (Brimson, 1991). Since the level of competition is high in the service competition, therefore a service firm needs to accurately estimate its costs. This new change in the industry has do costing a strategical issue it has become so important that it effects long-term strategic decisions as well as day-to-day opera ting decisions. Costing has become so important because it helps a firm in product or service organization, staffing and resource allocation. Accurate costing allows a company to plan resource consumption, price services properly and implement different strategies. But it is very difficult to initiate an Activity found costing in a service firm, because in a service firm an employee is engaged in multiple activities involving different time-period. This makes it difficult to trace the resources consumed by a cost object (Cagwin and Bouwman, 2002). Even though the service industry is interested in implementing an activity based costing system, but since these models are made using the activity based costing models of a manufacturing firm as frame of reference, therefore the industry is facing multiple problems with regards to this techniques implementation. The fundamental problem for this service industry is the absence of inventory, which receives an completion importance while u ndergoing a valuation process. Other important cost variables are direct hooey and labor which are also absent in a service industry. This leads to a problem of estimating