Data Model Overview for Activity-Based Costing

Company 200 manufactures and distributes bicycles and bicycle accessories. The company wants to improve its competitive advantage in the bicycle market. Although sales have been increasing over the years, the overall profitability of the company has decreased. As a result, the company initiates a performance improvement project that is based on analyzing customer and product profitability.

The company believes that by studying its profitability by customer, product family, and sales marketing channel, it can discover why overall profits have decreased. The analysis focuses on these areas:

• Locating hidden costs in the process of procuring bicycle bags to help the company reduce waste and increase efficiency.

• Assigning marketing and promotional costs to customers, product lines, and sales marketing channels to redirect marketing and sales to the most profitable customers, products, and channels.

• Reviewing the standard costs for painting the bicycle frames. The company suspects that these costs might be incorrect due to rework. Therefore, it would like to determine how much rework, by bicycle model, exists when they paint bicycle frames so that the company can correct the standard cost for painting frames.