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Application of the Activity Based Costing System to the Wood Industry

Summary:

The selected article is about a research conducted on a small business company called "Fely Lemn S.R.L.", a manufacturer with a carpentry items for buildings and the ability to manufacture chairs, kitchen furniture, etc. The company focuses on three types of sales, Wood, Joinery items, and fire board furniture.

The research also discusses how there are multiple activities performed rather than items to be focused on when accounting costs. "it is better to use the companys allocation for each activity and not for each function and product. " ( Daniel P. 2016). The company is using the ABC method, a method that uses allocation and helps reduce costs and increase company profits.

Reaction:

The activity-based costing is a method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. Depending on the business size and type, this method can be very useful in bringing in high profits. in this example, being we had a small business with only 4 employees and multiple activities to be performed, The ABC method does seem to be useful to reduce costs related to quantitative objectives and focus on the activity type per the business order.