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Need help with my writing homework on Activity-Based Costing Implementation for Insurance Company. Write a 2000 word paper answering;
Need help with my writing homework on Activity-Based Costing Implementation for Insurance Company. Write a 2000 word paper answering; ABC can act as a lens into the business process, allowing your resources to be more efficiently allocated while reducing costs. It can also be an allocation mechanism, facilitating the transfer of pricing internal and external to the organization, thereby making "indirect" costs into "direct" costs (Wipro, 2002). If implemented correctly, it becomes strategic management and even marketing segmentation tool. The creation of OLAN software programs and ABC-compatible IT systems have made ABC systems far easier to implement.
Nevertheless, initial setup and implementation of the system are by no means simple. These can take from six to 12 months. The Institute of Management Accountants (IMA) in Montvale, N.J., recommends starting with a pilot study to see on a smaller scale what can happen in the larger scheme of things. For our pilot study, we will want to begin with your worst department, where you'll be sure to see some success and better understand the cost-uncovering nature of ABC implementation. This will bring about quicker acceptance of implementing the new system from your upper levels of executives and management (Chutchian-Ferranti, 2005). The success of ABC in one area is likely to prompt the company to begin wider implementation for the purposes of modelling and analyzing operational processes, in order to identify and make operational improvements throughout your entire organization (Wipro, 2002). Successfully modeling your operational cost drivers in your life insurance processing locations and departments could very well lead to the implementation of ABC for more cost savings, increased marketing results, and even expansion of your business in your P&C locations and department and any other areas of your organization that could stand to have its activity more efficiently managed.
To prepare for implementation, we begin with your company's or department's assembled team-which will include members from financial operations, IT, human resources, management, and marketing-identifying its key activities. All the activities performed need to be identified. It is imperative to distinguish between "activities" and tasks that people perform. An "activity" is defined as a process having a definite starting and ending point(s). an activity takes an input, adds some of the other value to it, and converts that mixture into outputs (Wipro, 2002). For studying and analyzing your life insurance department, the list of key activities could comprise prospecting calls, customer service calls, group motivation/evaluation meetings, individual motivation/evaluation meetings, travel between appointments, sales presentations, paperwork, data entry, paying claims, paying commissions and salaries, and continuing education and training. Some of these can be further sub-divided. Second, your team needs to estimate resource cost drivers. Each activity, captured in the first stage, consumes some resources to be performed. In this stage, the cost accounting of all the resources that contribute towards an activity is done. This data is readily available in the general ledgers of your company. However, its extraction can be a tedious task, as it is common to find the costing information in granular details running to accounts and sub-ledger levels. This step is often the under-estimated cog in the wheel of the process. The capture of costs of all the resources can be a very time-intensive task.
