MIS 205 – COMPUTER INFORMATION SYSTEMS

Assignment

UPS COMPETES GLOBALLY WITH INFORMATION

TECHNLOGY

Section: 8

PREPARED FOR

Mirza Ferdous
Faculty Member
School of Business
North South University

PREPARED BY

Moin Uddin Ahmed ID# 071278030

Date of Submission: February 17, 2009

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1. What are the inputs, processing, and outputs of UPS`s package tracking
system?

Answer:

2. Does ABC produce an accurate costing picture than traditional costing

system?

Answer:

Yes, ABC produce an accurate costing picture than traditional costing system. The reasons
are:

• Product cost is more accurately measured in ABC compared to traditional costing system.
Because, in traditional cost accounting, predetermined overhead rates are computed by
dividing budgeted overhead costs by a measure of budgeted activity. This practice results
in unstable unit product costs. In ABC, the costs of idle capacity are not charged to
products in determining accurate product cost (Garrison, Noreen & Brewer, 2007-2008).

• Organizational sustaining manufacturing costs are assigned in traditional costing system.

But they are not always directly related to product cost. In ABC these costs are not
assigned and thus ABC identifies product costs more accurately (Garrison, Noreen &
Brewer, 2007-2008).

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 • By using traditional costing system we determine the product margin by only including
the manufacturing costs and non manufacturing costs are not included here. But in ABC
both manufacturing and non manufacturing cost that are related to product are included
and thus it determine the product margin more accurately ( Atkinson, Kaplan & Young,
2004).

• In ABC customer costs are determined by customer profitability analysis which is not
done in traditional costing system (Garrison, Noreen & Brewer, 2007-2008).

3. Can you identify the ‘activities’ in the University of Southampton library?

Answer:

The activities in the University of Southampton library can be divided into 2 segments:

I. Activities of service provider

II. Activities of service user

The main activities of service provider consist of the following:

 Cataloguing: In this University specific skilled staffs arrange the books in a

particular order so that any type of book can be found easily.

 Acquisitions: The staffs do the job of acquisition of books by using catalogue

number of each book.

 Periodicals: These are kept in different section and staffs arrange them
systematically and update after specific time period.

 Data preparation: Books lending and receiving data are processed by a skilled
employee and updated daily.

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  Enquiry desks: A staff sits on the desk and helps solving different problems of
customers.

 Inter- library loans: Books are exchanged between different university libraries
and it is controlled by a management staff.

 Archives and special collections: Library collect specific articles and collections
by using online ordering.

 Attendants: An employee keeps a book to list the name of everyday attending

readers who visits the library (Goddard and Ooi, 1998).

4. Can you identify the “activity cost pools” for the library of the University of
Southampton and explain how these cost pools can be measured?

Answer:

The activity cost pools for the service provider are follows:

 Book Processing

 Periodical processing

 Enquiry and consulting

 Loan service

 Inter- library

 On-line services

 Archives

The cost pools for the service user are follows:

 New books processing

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  New periodicals processing

 Enquiry services and consulting

 Loan service cost

 On- line information

 Inter- library loans

 Archives

Activity cost pool is a bucket in which costs drivers are accumulated that relate to a single
activity measure in the ABC system. These two cost pools mentioned earlier of Southampton
University library consists of different cost drivers which are allocated in terms of their actual
portion of activity in the particular cost pools. Thus by allocating all the cost drivers properly the
cost pool is measured (Goddard and Ooi, 1998).

In the library of Southampton the above mentioned cost drivers were identified in different cost
pools and some of them are shown below:

Cost Pools (Service Provider)

Book Periodical Enquiry & On-line

Loan Service
Processing processing Consulting Service

Cost Drivers Enquiry

Cataloguing Periodicals Loan counters Librarians
desks

Acquisitions Bindery Social Administration Online

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 science
service
librarians

Attendants Administration Electricity Attendants Electricity

( Goddard and Ooi, 1998).

5. What is meant by ‘proxy measure’ over here? What are the limitations of
it?

Answer:

In this case, some cost drivers were ideal for the activities but there was lack of record for
them. But they were still included by carefully assuming the measure which is known as proxy
measure. Usually the proxy measure is selected in a way that becomes very consistent with the
activity. In this case the number of students was a reasonable proxy.

The limitations of using proxy measure are:

 -The use of proxies introduces discrepancies between consumption of central resources

and the allocated change for the resources (Garrison, Noreen & Brewer, 2007-2008).

 If proxies are determined inaccurately, then it can have a significant effect and thus it can
make the ABC costing system very inefficient (Morse & Zimmerman, 1997).

 Number of activity and activity costs differ from industry industry, so it is really hard to
determine the proxies accurately. For example, if a factory manager is given a job to

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 measure the consumption of electricity in a library, he will surely make a mistake if he
uses a proxy measure as the consumption of electricity in a factory is much more than
the consumption in a library( Atkinson, Kaplan & Young, 2004).

6. If you are asked to implement ABC system for NSU library, how would you
start? Can you identify possible cost pools or how these cost pools can be
measured for NSU library?

Answer

First of all I went to NSU library and there a found an administrative officer of that library.
Then I asked him about the implementation of ABC system there. By his help, I was able to
identify some cost pools and cost drivers of the library.

Some of the cost pools of NSU library were:

 Book Processing

 Updating

 Journal Processing

 Loan Service

 Order Process

 Billing Service

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  Guiding Service

 Enquiry service

 Consulting Service etc….

Activity cost pool is a bucket in which costs drivers are accumulated that relate to a single
activity measure in the ABC system. These two cost pools mentioned earlier of North South
University library consists of different cost drivers which are allocated in terms of their actual

portion of activity in the particular cost pools. Thus by allocating all the cost drivers properly the
cost pool is measured (Goddard and- Ooi, 1998)

In the library of NSU, the above mentioned cost drivers were identified in different cost pools
and some of them are shown below:

Cost Pools

Book Journal Billing

Loan Service Order Process
Processing Processing Service

Inter
New Journal
Shelving University Administration Staff Service
Cost Drivers payment
loan

Receiving Administration Loan process New order Electricity

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By identifying and analyzing I observed that there were many similarities of activities of North
South University and Southampton University. Still visiting NSU library helped me a lot to see
some activities practically and identify the cost pools.

References:

Garrison, Noreen & Brewer, 2007-2008, Introduction to Managerial Accounting, McGraw-

HILL, USA.

Morse & Zimmerman,1997, Managerial Accounting, IRWIN, USA.

Goddard & Ooi, 1998, Activity based costing and central overhead cost Allocations in
universities, CIPFA, University of Southampton.

Atkinson, Kaplan & Young,2004, Management Accounting, Pearson Prentice Hall, USA.

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