Submit a meaningful reply of 400-450 words to the below post. Demonstrate analysis, and synthesis of all course materials, tact, and insight. For each reply, reference the textbooks (chapter 1 attached), at least 3 journal articles, and the correlated thread.
Adhere to current APA format in all posts. Note that management techniques must not be capitalized. Consult the grading rubrics to see how you will be graded.
An organization should be aware of different operations that incur many costs and hinder an increase in profit. It will enable organizations to know the cost of production of each item and whether the cost incurred can be reduced. This majorly affects manufacturing companies that deal manufacture of different products; thus, determining the cost of each product will aid in determining its performance and profitability. Therefore, manufacturing companies need to adopt Activity Based Costing useful in determining operational activities happening within the company and assigning a cost to each operation. This report will discuss how Tesla Inc. uses Activity Based Costing and its contribution to the success of Tesla Inc.
Tesla Inc. is a multinational automotive and energy company whose headquarter is located in Austin, Texas, United States of America. The company deals with designing, developing, manufacturing, selling, and leasing electric vehicles, energy generation, and storage systems. Key products offered include Model Y, Model X, Model 3, Model S, and Tesla Roadster vehicles (Yahoo,2022). The total cost of production for such a multinational corporation poses a challenge to determine because it accounts for every product. The use of Activity-Based Costing by Tesla Inc. ensures that they accurately allocate costs incurred to each product which aids in making a better and informed decision for each product depending on its performance.
Activity-Based Costing impacts Tesla Inc. in numerous ways. It provides better costing accuracy by allocating overhead manufacturing costs accurately to specific products and processes that need the activity for production (Blakely-Gray,2021). Therefore, the company can eliminate any irrelevant cost that it may have incurred and aid the management in making realistic pricing decisions. It will lead to customer satisfaction because the company will be able to deliver quality products, thus increasing its profitability and performance. It will aid the management in making better decisions in creating a budget for the company.
In addition, this system can enable Tesla Inc. to improve its manufacturing and business procedures as it allocates indirect costs to products based on the aspect that generates that cost hence the management of Tesla Inc. can identify the business process that indicates good performance and ones that need to be improved resulting to a good performance of the company (Thompson,2019). Tesla Inc. can use this system to identify high-cost, low-value activities that incur unnecessary costs and eliminate them, thus improving production efficiency. It will aid in improving the quality of products developed by providing accurate information about production and cost that need to be checked.
In conclusion, companies should reduce the cost of production by eliminating unprofitable products and unnecessary costs incurred while manufacturing products. Therefore, they need to strategize on the best technique to help price their products to have a competitive edge in the market. Consequently, companies need to adopt a costing technique such as Activity Based Costing to understand the overall production procedure and identify opportunities that need to be utilized, leading to an increase in revenue. Activity-Based Costing has proven to be one of the best techniques to reduce the cost of production, affecting numerous companies.
References
Blakely-Gray, R. (2021). Activity-Based Costing | Definition, Process, & Example. Patriot Software. Retrieved 10 May 2022, from
Thompson, J. (2019). What Types of Businesses Do Activity-Based Costing? Bizfluent. Retrieved 10 May 2022, from https://bizfluent.com/info-12105073-types-businesses-activitybased-costing.html (Links to an external site.).
Yahoo, F. (2022). Yahoo is part of the Yahoo family of brands. Finance.yahoo.com. Retrieved 10 May 2022, from https://finance.yahoo.com/quote/TSLA/ (Links to an external site.).
Blakely-Gray, R. (2021). Activity-Based Costing | Definition, Process, & Example. Patriot Software. Retrieved 10 May 2022, from
