Report on Profitability of Essendon Electronics

BUACC 2613
SEMESTER 2, 2018
GROUP ASSIGNMENT
REPORT ON PROITABILITY OF ESSEDON ELECTRONICS

TABLE OF CONTENT
Executive Summary............................................................................................................................... 2
INTRODUCTION................................................................................................................................... 3
Profitability under Traditional Method.................................................................................................... 4
Profitability under ABC Method.............................................................................................................. 4
Rationale for change in profitability........................................................................................................ 7
Benefit, Cost and Limitation of using ABC............................................................................................. 8
Advantages of Activity Based Costing................................................................................................ 8
Disadvantages of Activity Based Costing...........................................................................................9
References:......................................................................................................................................... 10

Executive Summary
The report seeks to examine the difference in overhead cost allocation on account of change in
method of overhead allocation. The report examines difference in cost allocation over two products
via traditional method and ABC analysis.
Further, the impact of such action on the profitability of two products have been analysed. Thus, in
short the report deals with the following:
(a) Analysis of the profitability of the products under traditional method;
(b) Analysis of the profitability of the products under ABC method;
(c) Rationale for change in profitability;
(d) Response to comments of Mr. Lockett’’s;
(e) Recommendation for using ABC:
(f) Benefit, cost and limitation of adopting ABC.