Task - Case Analysis: John Deere Component Works - Activity based costing.

EXECUTIVE SUMMARY

Conventional costing systems at xxx became outdated due to recent organizational changes and led to distortion of product costs and subsequently erroneous strategic decisions. Activity based costing will provide the company with more accurate product costing and is likely to uncover that, contrary to what the management believes, specialty product lines are less profitable than their high-volume counterparts. A comprehensive ABC system is recommended for the company, as it also helps to manage resources by reducing non-value added activities and reporting the cost of spare capacity. Key factors for successful implementation of ABC are behavioral, financial, technological, and organizational and...