Using suitable examples, explain the important factors for selecting the cost drivers in ABC

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Operations Management
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Operations Management
1. What is the need of Total productive maintenance (TPM) in a manufacturing
company? Select any manufacturing company of your choice, and do a detailed study
of its TPM process.
2. Michael Porter in 1985 in his book, "Competitive Advantage: Creating and Sustaining
Superior Performance" proposed three generic strategies of
cost leadership,
differentiation, and focus. Select any Indian company and explain how it has
implemented the Porter’s generic strategies.
3. Activity-based costing (ABC) has helped many companies for decades gain a true
understanding of their costs to produce and distribute products to customers. ABC
provides a precise, accurate view of costs at very granular levels—namely, at the
individual product, service and customer level. Successes during the 1980s in applying
ABC methods to manufacturing prompted an eventual expansion of this methodology to
other key components of the supply chain (e.g., distribution). Manufacturers such as
Proctor & Gamble and Warner-Lambert began using ABC models to determine their
overall costs to serve individual customers (e.g., Walmart), and to evaluate the costs of
offering different individual services to customers (e.g., services such as vendor-
managed inventory and advanced shipment notices, or ASNs). (Source: Miller, B. T. The
ABCs of Activity-Based Costing for Logistics.)
a. What is ABC and how is it different from the traditional costing methods?
b. Using suitable examples, explain the important factors for selecting the cost drivers
in ABC.
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