You are required to prepare a proposal on the potential benefits and costs of implementing an activity-based costing (ABC) system to determine customer profitability for a local bank, Kangaroo Commercial Bank Limited. The bank currently uses a traditional costing system. The clients of Kangaroo Commercial Bank are regional residents in North Australia. The banks consider extending its operation across some metropolitans, such as Sydney and Melbourne, to serve the retail banking and investment demands of its clients

Required: 

a. ABC system requires a set of operational activities and activity drivers. In identifying activity drivers which mainly causes costs to be incurred at an activity level, what important factors should be considered? Explain to management why you consider these important. 

b. Using at least two academic research articles to support your background research, write a minor report (in 500-600 words) to advise the management of Kangaroo Commercial Bank on the potential benefits and costs associated with implementing an ABC system.

Answer rating: 100% (QA)

Traditional costing assigns costs to products based on an average overhead rate using budgeted and estimated costs and volumes to determine what the standard cost should be This application does not p... View the full answer