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The proposed solution will be useful to Riordan Manufacturing because it will enhance the level of efficiency in cost control . The organization presented in the case study manufactures several products such as plastic bottles , fans , heart valves and custom plastic parts . Therefore the establishment of cost and profit center for each product is a must for correctly assessing the level of costs and earnings . Currently the management focus is on production . However the management intent is to shift greater focus to implementing a managerial accounting system that will correctly allocate costs and

assign the level of profits proportionally . In this respect , implementation of activity based costing is the best solution inasmuch as it facilitates the identification of allocation criteria based upon which costs and profits can be assigned (cited in Atkinson , 2006

The advantage of using the managerial accounting system mentioned above is that the management can exercise its own discretion about how to allocate costs between different processes and products . Unlike the financial statements prepared under the strict scrutiny of the GAAP internal reports generated by the managerial accounting system mentioned above do not have to follow any hard and fast rules (cited in Brigham Ehrhardt , 2007 . As a result the management can customize the system to the specific characteristics of its own business . This customizability is one of the most important features in favor of implementing an activity based costing system . The customizability enables the management not only to assign costs to different processes and products based upon...

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