I chose to write on Apple, below is the information that is required to be in the research paper.
A 12-15 page (excluding appendices, table of contents, abstract, reference, and bibliography) research
paper (case study) is required. This paper represents 35% of the final course grade. Students will select a
firm operating in the international business environment. This paper will be prepared consistent with the
current APA Manual and will have a minimum of ten different references (No Wiki�s or Pedia�s). Some
bibliography and references will most likely come from the firm you have chosen: source documents, e.g.,
annual reports, and financial statements. As such this reduces the need for peer reviewed sources.
However, peer reviewed sources are still important and
should be listed in the bibliography/reference section(s) and cited in the paper as appropriate. This paper
is due the last day of class.
In addition, the research paper will be prepared consistent with the following guidelines: 1. This serves as
an introduction to the Research Paper. Provide an overview of the
research design of the paper. Introduce the various topics that will be addressed in the research paper.
Identify the method(s) that will be used to collect the data for the topics and how that data will be
evaluated. 2. There will be a brief discussion of the firm to include its principle goods and services,
market share, geographic locations where it operates, and major competitors.
- Evaluate and discuss whether the firm could benefit by using Activity Based Costing (ABC). The
discussion should include what factor(s) influenced your decision, the ramifications of implementing ABC
in the international business environment, and how
you would structure the distribution of costs using ABC for your firm.
- Evaluate and discuss whether the firm could benefit by using standard costs. The discussion should
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include what factor(s) influenced your decision, the ramifications of costs, quantity, and variances, and
the ramifications of using standard costs in the
international business environment.
- Evaluate and discuss how the firm could benefit by analyzing future projects in terms
relevant costs. This discussion should include the firm�s future plans, such as,
expansion, consolidation, and downsizing and how relevant costs could be used in the decision making.
- Summary and conclusion(s). The discussion should provide a brief summary of the previous sections,
and the conclusions you have reached.
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There is no distinct, ideal management accounting system that ensembles every business
enterprise. Each organization has specific circumstances, business operations, and practices that
lead to the application of different management accounting practices (Boute et al., 2015). This
paper discusses the concept of Activity-based costing, standard costing and relevant costing
using Apple Company as a case study.
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Table of Contents
Apple Incorporation Background Information 5
Activity Based Costing (ABC) 6
Benefits of using ABC costing system to Apple Inc. 7
Ramifications of Using ABC System in an International Context 8
Standard Costs 9
Relevant costs 12
Future Benefits of relevant costs 13
How Relevant Cost could be used in Decision Making 13
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Multinational Corporation often incurs a lot of costs during its day to day operations.
Therefore, the method used to measure, calculate and present these costs is important as it helps
in making managerial decisions. Such decisions made by the management will have an impact
on the way the organization operates its business activities and thus has an impact on
organizational goals (DRURY, 2013). The primary goal of any organization is to make profits,
achieve set organizational goals with the aim of attaining business sustainability. Therefore,
business enterprises must minimize its costs of production to maximize profits to achieve its
organizational goals. Managers have to make cost allocation decisions to determine the
relationship between the costs and the cost objective (Drury, 2013). There are three important
reasons costs have to be allocated. That is, to acquire desired enthusiasm by prompting
management behavior and thus supporting goal correspondence and managerial strength. Costs
are also allocated to compute income and assets valuation and finally, to justify costs or obtain
reimbursement. Accountants in Multinational Corporations uses various accounting systems and
methods to calculate and present organizational costs relevant to assist the management in
making managerial decisions.
This paper discusses the use of Activity Based Costing (ABC) in business organizations.
On the same note, the paper discusses some of the benefits organizations gain from using
standard costs, and relevant costs and the impact of the different accounting systems on
managerial decisions. A qualitative approach is used and a case study method utilized to collect
and analyze data relating to the topic. Thus, the paper uses secondary sources, organization
financial data and other relevant information to draw information and analyze activity based
costing, and the use of standard and relevant costs in Apple Inc.
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Apple Incorporation Background Information
Apple Incorporation is a multinational IT company whose headquarters is located in
Cupertino in California. The corporation was started in the year 1976 by Steve Jobs, Ronald
Wayne, and Steve Wozniak (Investor.apple.com, 2016). The corporation designs and
manufacture customer electronics and PC software. Some of the key products the company
offers include Apple computers, iPhones, Smartphones, tablets, smart watch among other
consumer electronics (Money.cnn.com, 2016). On the same note, Apple develops consumer
software such as iOS operating systems, OS X, Safari web browser among others. The company
also owns various online stores such as iTunes Store, Mac App Store, iCloudand IOS App Store.
Apple Incorporation sales its products across the worldwide and thus the company
products are found in almost every country. The company manufactures a wide variety of
consumer products that penetrate many different markets. Some of the major competitors for
Apple Inc. Includes;
Google Incorporation: Google is one of the Apple competitors in different markets.
Google produce Android-powered smartphones which compete with Apple’s iPhone. Google
also provide cloud services using Google Drive, which competes with Apple’s iCloud.
Samsung: Samsung is a Korean-based smartphone manufacturer whose products
competes with Apple smartphones
Microsoft: This Company is a software giant which has been in the market for a very
long time and is one of the primary competitors of Apple Incorporation (Rawlinson, 2016)
Other competitors of Apple company includes; Dell, HP, Asus, Nokia, and Lenovo.
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Activity Based Costing (ABC)
There is no distinct, ideal management accounting system that ensembles every business
enterprise. Each organization has specific circumstances, business operations, and practices that
lead to the application of different management accounting practices. Activity-based costing is a
costing technique where costs to products or services are assigned based on the resources they
consume (Schulze et al., 2012). Activity-based costing system assigns costs to those operations
that are the real cause of the overhead costs in the organization. The activity-based system can be
utilized for the targeted reduction of overhead costs. This costing system is ideal for complex
environments such as Apple incorporations. This is because there are many machineries,
produced merchandises and interwoven processes that make it complex to sort out.
Activity-based costing begins by identifying the costs that need to be allocated. This
stage is imperative since manager do not want to waste time dealing with a very broad project
scope (Weygandt et al., 2015). After that, secondary cost pools should be formed for the costs
earned to offer facilities to other parts of the firm. The secondary cost pools encompass clerical
salaries, computer services, among others in Apple Inc.
After that, the company should create primary cost groups for those expenses that are
more associated to the manufacture of goods or services. Apple Inc. has distinct cost groups for
each merchandise line manufactured. This is because costs tend to arise at this stage of the
Then, the company measures activity drivers. To achieve this, Apple Inc. Utilizes a
special data assembly system to gather requisite data concerning the action drivers that are
utilized to distribute costs in the secondary cost pool to the principal cost pool. On the same time,
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the system assists in allocating the costs in primary cost pools to cost items. Thereafter, the costs
are charged to cost objects by allocating the content so each primary pool to specific cost objects.
After all the costs are fully allocated, it is required that the results of the ABC system are
used to formulate reports to be used for the managerial decision. The management will then use
the ABC report to make managerial information such as reducing activity drivers utilized by
every single cost object and thus decrease the overall overhead cost utilized in the production of
The Benefits of using ABC costing system to Apple Inc.
Activity-based costing provides numerous benefits. Apple Inc. benefits a lot from using
this system. One of the main benefits that Apple enjoys from using this system is greater costing
accuracy. Apple Inc. can assign costs only to the products that need the activity for production.
This way, the company is able to eliminate allocating of irrelevant costs to the production of a
good or service.
ABC costing also enables Apple Inc. to improve its business processes. The ABC
allocates indirect costs to a project based on the cost driver or the aspect that generates the cost.
Since the costs are allocated based on the product, the management can identify business
processes that are performing and those that need to be improved (Warren et al., 2013). ABC
costing system enables managers in Apple Inc. to identify non-value supplementaryundertakings
and also to allocate better scarce capitals to resourceful and cost-effective activities. The ABC
system can also help the company to have a continuous improvement of business processes.
An ABC system also helps identify wasteful products in the production process. The
ABC system accounts cost in the same manner production is performed, allowing Apple Inc. to
comprehend better where the overhead costs are used. This information can help the company to
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identify wasteful products and unnecessary costs. This way, the company can utilize resources
productively. The ABC system also aids to fix prices of merchandises or services that are
overrated or priced incorrectly. Therefore, the ABC system helps to improve overall product and
service quality by constantly providing data about production and cost issues that need to be
Apple Company should use the ABC system because the company provides customized
products and services. The company production process is also complex and requires different
machines and complex processes.
The Ramifications of Using ABC System in an International Context
For a multinational company operating in diverse markets such as Apple Inc. to operate
successfully, the company needs to hold a strong organization structure. Multinational
companies must have a high quality standard to enable consumers to identify the business entity
as consistent and a reliable. The cost management system not only provides important
information that assist multinational firms to develop products and offer services that meet
quality standards but also, help to reduce the overall costs.
Activity-based costing at times may not prove to be effective in the global context
because of its complex nature. The implementation of ABC system is quite expensive and
requires a lot of time. This is because each business process must be analyzed and broken down
into its individual components. Therefore, it may be time consuming and expensive for the
company to collect data, evaluated and enter into the new system.
Reports that are generated using the ABC system have information that may be different
from the information that is conveyed using the traditional cost method. Some activity-based
expenses may not be relevant in the global context especially in decision-making situations. For
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example, the ABC does not kowtow to accounting canons and is not suitable for outside
reporting. Due to the fact that traditional figures have been used widely, it may be confusing to
interpret ABC data and thus may result in bad decision making.
Standard costing refers to the process of substituting a cost that is expected to an actual
cost in the accounting records of a firm (Warren et al., 2013). After that, variances showing the
difference between the actual and expected costs are recorded periodically. The use of standard
costs is a simplified substitute for cost layering systems applied by firms such as FIFO and
LIFO, which entail the use of great volumes of historical cost information maintenance for
products held in the stock. It involves the creation of an estimated cost for an activity in the
company. The reason for using standard costs is related to applications that require much time to
collect their actual costs. Hence, standard costs can be used to represent an approximation that is
close to actual costs.
Apple can benefit from standard costs because it helps in achieving cost control. The
process of comparing the standard costs with actual costs help in indicating areas within the
organization whose costs are going out of control. This facilitates the management’s immediate
action to intervene. Apple’s management is able to achieve a fixed quantifiable target by using
the variance in order to correct these costs. Focus on the variation from the standard costs
promotes consciousness of costs and brings in a culture of efficiency in controlling costs (Wild
& Shaw, 2013). The latest developments such as price changes can be learned through standard
costs and, therefore, allowing the management to review their selling prices.
The company can benefit by achieving process efficiency because standard costs have an
indirect contribution to efficiency. Setting standard costs requires the management at Apple to
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study the different aspects of operations and its processes. The determination of inventory
standard costs requires the study of material control processes and the study of these will expose
the various inefficiencies. This provides an opportunity for managers to correct this and promote
efficiencies. The comparison of actual costs with standard costs helps in achieving the evaluation
of the performance in various cost centers within the organization.
One of the major benefits of using standard costs by Apple is price fixing. It can be able
to formulate the policies for production in advance. Standard costs give room for making any
estimate when undertaking product planning or during the process of pre-manufacturing of a
product. It also helps in the simplification of the valuation of inventory because it transfers the
dissimilarity between the actual costs and the standard costs into a dissimilar variance account.
Standard costs will help in the promotion of the management process by exception where
the management sets a fixed target and does not interfere with the provided targets are achieved
or adhered (DRURY, 2013). The management has the authority to interfere when there is a
presence of deviations and relieves the management from routine duties to focus on core matters
of the business. The costs of individual processes can be identified giving space for budget,
planning and profit maximization by conducting product mix by Apple management.
The analysis of variance helps Apple management in singling out inefficiency by locating
the people who have the responsibility for any unfavorable variances. Therefore, the use and
analysis of variances help in fixing the responsibility for any inefficiency. Furthermore, it makes
all the executives to be conscious of cost which helps in the increment of productivity and
efficiency all through. The executives and management are finally motivated in trying to achieve
the standard performance. The delegation of authority becomes effective given that the
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management can delegate responsibility. They instruct the persons specified about the standard
performance they ought to achieve.
The use of standard costs by Apple in the international business environment may not be
appropriate due to many factors. It cannot be applicable for non-standard products. The standard
product costs usually apply to environments for manufacturing that the output from the
production process is identical. Their suitability is limited in environments with non-standard
products and customized to the specifications of the customer. Standard costs also have the
tendency of becoming outdated easily. The international product life cycle is shorter, and review
of standard costs need to be frequently done. This increases the costs of operating the standard
Standard costs cannot be applied for performance setting and control in manufacturing
environments that are highly automated. Apple will experience an underlying assumption that
regulate can be achieved by focusing on the efficiency of the labor force in standard costing.
Automated systems rates of production and resources consumption are controlled by
mechanisms and not the employees. The significance of the variances for executive control
reasons is highly dependent on the standard cost type used. Adverse variances together with ideal
standards contain varied meanings from any adverse variance calculated using a current
The use of standard costs is inconsistent with Apple’s concept of continuous
improvement due to the adherence to the present standards. Variance analysis is normally carried
out on the basis of an aggregate. In the international business environment, more detailed
information is needed to undertake an effective control and management.
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The concept of relevant costing has great significance in management accounting because
they are pertinent with regard to a particular decision. The relevant cost is those costs that are
incremental and avoidable in implementing a business decision in an organization (DRURY,
2013). As in, it is a cost that transforms if an alternative course of action is taken. For a cost to
be relevant to a decision problem, it must have a future benefit and differs among competing
alternatives. Relevant costing is used to determine the objective costs of a managerial decision.
That is, the cost of a business decision is the magnitude of cash outflow that will be spent as a
result of implementing a business decision. Relevant costing area of concern is only objective
costs and ignores other costs.
Relevant costs encompasses of differential costs, marginal costs, and opportunity costs.
Differential costs are the variance between costs more than decision-making alternatives (Boute
et al., 2015). For instance, the difference between the cost of producing an additional iPad and
the cost of producing an iPhone. In a situation where the same item with similar amount appears
in all the alternative, it becomes irrelevant and should be left out. To make a decision, it is also
important to compare the incremental costs and incremental revenues.
Marginal costs which are also referred to as incremental costs are the overall cost-change
that Apple Company will experience by producing one additional unit of a product such as a
Finally, the opportunity cost is the cost of an alternative that is left out in order to pursue
another action. When an organization makes a decision to pursue a particular project, it should
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not overlook other existing opportunities for another project. Instead, the organization should
consider all the alternative opportunities and select the best among all the other alternatives.
Future Benefits of relevant costs
Managers use relevant costing to make decisions that result in future benefits. Proper
utilization of the concept will enable an organization to expand by identifying alternative
opportunities existing in the production process, diversification of products and expansions to
new markets (Boute et al., 2015). Based on the opportunity cost, marginal benefits and the
difference between the different alternatives, the management will be able to make decisions and
produce the right mix and thus business expansions. Relevant costs are also important in making
decisions concerning corporate restructuring. Managers use this concept when downsizing or
rightsizing the organization to create a lean corporate structure.
The organization structure of Apple is one of the many factors that has enabled the
company to be successful in innovation. The organization structure often creates opportunity for
business growth. Apple’s traditional hierarchical structure, good leadership, and proper decision-
making have enabled the company to succeed in innovation and expand globally.
The management of Apple Inc. can consolidate the different divisions to streamline
operations to provide a good environment for even more innovation. The result is the continued
increase in record sales and launching of successful new products. This indicates that the
company is thriving and is able to innovate in a highly competitive and the dynamic technology
How Relevant Cost could be used in Decision Making
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Relevant costing is a useful tool used by managers in making a short-term financial
decision. The idea of relevant costing is imperative to enable managers to eliminate irrelevant
information in the decision-making process. By doing so, the management is barred from
focusing on information that may affect the decision-making process negatively.
The concept of relevant cost is valuable only in making managerial accounting activities,
but it is not applied in financial accounting because spending decision is not supposed to be
included in the financial accounting (Boute et al., 2015). Therefore, relevant costing is helpful in
helping management to make decisions such as whether to purchase a component used in
production or manufacture, whether to accept or reject a unique special order, how to utilize the
scarce resource in an optimum manner, or whether to discontinue a product line. Apple uses
relevant costing when making pricing decision of their products. The products offered in the
market are charged a price that offers a sufficient profit margin that is above it’s the total cost
incurred in producing, transporting and marketing the products. Apple Inc. uses the concept of
relevant costing in making the following decisions;
• Competitive pricing decisions: Apple managers use the concept of relevant costing to
set-up competitive prices for their products in the market depending on the level of competition.
• Make or buy decision: Relevant costing is a useful tool for make or buy decisions in
Apple. Managers apply the concept of relevant costing when making decisions on what raw
materials to purchase, processes to outsource among others.
• Further processing decisions: Apple managers also use the concept of the relevant
concept when making processing decisions.
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In conclusion, the method used to measure, calculate and present costs is important as it
helps in making managerial decisions. Such decisions made by the management will have an
impact on the way the organization operates its business activities and thus has an impact on
organizational goals. The activity-based costing system assigns costs to those operations that are
the real cause of the overhead costs in the organization (Schulze et al., 2012). The activity-based
system can be utilized for the targeted reduction of overhead costs. This costing system is ideal
for complex environments such as Apple incorporation. This is because there exists machines,
produced products and interwoven processes that make it complex to sort out.
There are many benefits that Apple Inc. enjoys as a result of using Activity Based
Costing. The main benefits include improving business process and identifying wasteful products
in the production process. However, the implementation of activity-based costing may be quite
costly and requires a lot of time as it requires that the processes are broken down to identify each
The reason for using standard costs is related to applications that require much time to
collect their actual costs. The Apple company benefit from using standard costs as it helps the
company to achieve cost control. On the same note, the company is able to achieve process
efficiency and promotion of management costs. However, the concept of standard costing may
not be applicable in the global context because it cannot be used for non-standard products.
Standard costs cannot be also used in performance setting and control.
The relevant cost is those costs that are incremental and avoidable in implementing a
business decision in an organization. These costs are important as it enables the company to
make pertinent decisions between the various alternatives. Therefore, help in identification of
new markets, consolidation and downsizing process within the company. The underlying
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principal is to identify costs that are relevant and those that are irrelevant in order to make a good
Apple company success in innovation and business operations is, therefore, as a result of
good leadership, decision-making process and cost management techniques. This is because the
efficient cost management result in efficiency in production, increased revenue and enable the
organization to focus on other things apart from production.
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Boute, R., Bruggeman, W., &Vereecke, A. (2015). Cost management in the supply chain: an
integrated approach–part 2. Cost Management, 40-48.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Drury, C. (2013). Costing: an introduction. Springer.
Schulze, M., Seuring, S., &Ewering, C. (2012). Applying activity-based costing in a supply
chain environment. International Journal of Production Economics, 135(2), 716-725.
Weygandt, J. J., Kimmel, P. D., &Kieso, D. E. (2015). Financial & Managerial Accounting.
John Wiley & Sons.
Warren, C., Reeve, J., &Duchac, J. (2013). Financial & managerial accounting. Cengage
Wild, J., & Shaw, K. (2013). Managerial accounting. McGraw-Hill Higher Education.