Applying the to Real Life Practice - Case Study Example

ABC focuses on accumulating costs thru activities while traditional costing focuses on accumulating costs within functional areas. ABC system is used as an internal system for management decisions while traditional accounting is for external purposes used by stakeholders and government’s review.

The rich information provided by the review of literature in the study further confirmed the advantages that managers acquire in terms of cost association by implementing ABC.  Managers are able to reduce costs in designing products and improve coordination with suppliers and customers.

However certain limitations of ABC use are observed in the case study.  Particularly, the case findings said that thru statistical computations, it was proven that ABC has no dependent relationship with the Return on Assets. Further, it was gathered from the study that there was weak evidence associating ABC and accounting profitability as dependent on the plant’s operational characteristics. 

The above findings suggest cognizance of both methods.  Profitability is a measure that is very much relevant for stakeholders.  They are very much interested in ROA and profitability which are their primary concern in investing. These factors are measured by the traditional method of accounting, while internal factors that will add to profitability are best measured by the ABC system.

In winding up, findings in the case are adaptable in real business operations as ABC is only an internal system that enhances profitability.