Beneath The SurfaceSuspicious not all areas of your company are bringing in a profit? Break it down with activity-based costing.
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Among the 1,500 plant varieties Bluemount Nurseries Inc.stocked, Nick Pindale suspected that some yielded profits and someonly losses. Unfortunately, Pindale, the CFO and grandson-in-law ofthe founder of Monkton, Maryland-based Bluemount wasn't surewhich was which.
Pindale sought answers from an accounting technique calledactivity-based costing, or ABC. Dividing nursery tasks intocategories such as potting and planting, he assigned costs to each.Then he determined which ones Bluemount performed cost-effectivelyand which would be better outsourced, trimmed or omitted. Theinformation identified the most profitable plants and even helpedprovide documentation for a bank loan needed to boost production ofmoneymaking lines.
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