Cost accounting: activity based costing

[Emma96]

Hello everyone

I have to write my thesis and implement ABC, I fear I might not use it in the right way.

For a big corporation I have to calculate whether it is better to outsource or to keep the rental of their offices in house. This corporation has a lot of empty offices that they want to rent out to other companies. So they want to know if it will be more costly to do it themselves or by letting a specialized company do it. We have to use ABC for this.

The problem is that I do not know where to start.

Kind regards,
Emma

 

[kirby]

“it divides production into core activities, defines costs for those activities, and allocates those costs to products based on consumption of the activities.” (principalsofaccounting.com)
Above is a quote explaining what ABC is.

You are not going to be doing that at all.

You are comparing the costs of two methods, not allocating the cost of a method to the overhead of a product.

Get price estimates from specialized companies and compare to cost of using in house employees to do the work.

 

[Emma96]

“it divides production into core activities, defines costs for those activities, and allocates those costs to products based on consumption of the activities.” (principalsofaccounting.com)
Above is a quote explaining what ABC is.

You are not going to be doing that at all.

You are comparing the costs of two methods, not allocating the cost of a method to the overhead of a product.

Get price estimates from specialized companies and compare to cost of using in house employees to do the work.

hi! Thank you for replying!

A detail I forgot to say is that we still need to calculate how much it is going to cost to manage the rental offices if they choose to do it in house. That's why we will analyse the activities to rent these offices out.

After applying this, we will compare with other companies (vendor rating)