Rock Fitness Inc. is a high-end athletic gear supplier. The production of gear involves many complex and specialized activities that before now have lacked organization or procedural direction. The production manager has mentioned recently about changing and applying a simple yet effective costing system to improve on efficiency of production and wants your advice about activity-based costing (ABC). While your advice has been solicit., the production manager has also stated that interrupting the existing costing system would be a detriment to the factory. Instead, the production manager has asked you to prepare a memo to the executive board explaining how implementing an ABC system is far too complicated and does not provide an overall benefit to the comp,.
In contrast, as the entry level accountant, you have knowledge and have verified that an ABC system would in fact assist the company more effectively in identifying the basis of costs and how to actually regulate the costs.
Questions:
Discuss the issues and ramifications of fulfilling the production manager’s request and how it effects the company.
How would you handle this situation and what action would you take to ensure that the cost benefit constraint of selecting a valuable costing system is not ignored,
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