What role does the GL Department play in the convertion cycle?

Answer: The general ledger department provides independent verification by reconciling WIP journal vouchers from cost accounting and summaries of the inventory subsidiary ledger from inventory control.

Discussion 16: Discuss the advantage of ABC.

Answer: ABC allows managers to assign costs to activities and products more accurately than standard costing permits. Some advantages that this offers are:
• More accurate costing of products/services, customers, and distribution channels
• Identifying the most and least profitable products and customers
• Accurately track costs of activities and processes.
• Equip managers with cost intelligence to drive continuous improvements.
• Facilitate better marketing mix
• Identify waste and non-value added activities.

Discussion 17: Discuss the disadvantage of ABC.
Answer: ABC has been criticized for being too time consuming and complicated for practical applications over a sustained period. The task of identifying activity costs and cost drivers can be a significant undertaking that is not completed once and then forgotten. As products and processes change so do the associated activity costs and drivers. Unless significant resources are committed to maintaining the accuracy of activity costs and the appropriateness of drivers, cost assignments become inaccurate. Critics charge that rather than promoting continuous improvement, ABC creates complex bureaucracies within organizations that are in conflict with the lean manufacturing philosophies of process simplification and waste elimination.