L. Elise Bowling Case 5A - Glaser Health Products BUS 630 Managerial Accounting Wendy Achilles February 25, 2013 Case 5A – Glaser Health Products Glaser Health Products of Ranier Falls, Georgia needs assistance in evaluating and classifying costs in order to implement an activity-based costing system. As stated in the case, these costs will be used for planning and control decisions rather than inventory valuation. The activity-based costing system will provide better allocation of Glaser’s overhead costs rather than a system to look at the cost drivers or the activities that their overhead costs comprise. Glaser’s general structure of an activity-based costing model should consist of cost …show more content…

Product-level activity center costs may be related to a specific product or grouped by activities before being assigned to products at the primary stage. Facility-level activity center costs may go through multiple preliminary stages before being assigned to products (Schneider, 2012). It is necessary to use a preliminary stage cost driver because this system assigns costs from activities to other activities. On the other hand, primary stage cost drivers is used to assign costs from activities to the cost objectives. This process eliminates distortions in cost allocations to products that result from production complexity (Schneider, 2012). Actually sitting down and laying out an activity-based costing system for a real company is much more difficult than a typical textbook ABC problem. Determining what causes a cost to occur is much more difficult than it originally might seem (Krupnicki & Tyson, 1997). Overall, I think that management’s decision to implement an activity-based costing system is going to work in their favor. The decision to implement ABC is often driven by the need to improve customer profitability analysis, to gain more accurate cost information for pricing or to prepare relevant budgets (Cohen, Venieris, & Kaimenaki, 2005). In this case, Glaser wants to identify costs used for planning and control decisions rather than for inventory valuation. Glaser is likely to see many