Answered Essay: INSTRUCTIONS: make a thoughful argument about topic. Kaplan and Cooper argue that if higher-level, nonvolume related costs

INSTRUCTIONS: make a thoughful argument about topic.

Kaplan and Cooper argue that if higher-level, nonvolume related costs such as batch level costs etc are allocated to the product unit level the resultant unit cost will be largely meaningless. Clearly, their approach to ABC cannot be reconciled to that of the Japanese companies. There is, however, no necessary contradiction between the Kaplan/Cooper approach and that of Zimmerman. Zimmerman merely introduces a category of long-run volume related costs which are effectively ignored in Kaplan and Cooper’s analysis.

The only necessary difference is that, with Zimmerman, the unit level cost would include a proxy for the ‘hidden’ costs of using labour that arise in the longer term. There would appear to be a good case, therefore, for including Zimmerman type allocations in a Kaplan and Cooper style ABC system.

Expert Answer

In the context of the given question, their are difference of perceptions between Kaplan and Cooper versus Zimmerman. However I agree with Zimmerman because certain variable costs like labour are very unpredicted which can change any time. Therefore to take them into account as ‘proxy’ costs means they are included in the calculations however their exact figure is ot predetermined which is sufficient to calculate cost analysis. Unlike in Kaplan and Cooper style where they reinstate including the batch level costs everytime to a product’s cost as a result the resultant unit cost is not a true representation of the actual cost of the product. Therefore their figures are less accurate than those of Zimmerman’s approach. The good idea is to consolidate both the ideas to estimate the product cost.

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