El Dorado Company has two production plants. Recently, the company conducted an

Question

El Dorado Company has two production plants. Recently, the company conducted an ABM study to determine the cost of activities involved in processing orders for parts at each of the plants. How might an operations manager use this information to manage the cost of processing orders?

Question 2 options:

Set up an ABC costing system

Identify benchmarks

Compare the cost to process an order at each plant and the nature of the orders to determine if costs are out of control. If out of control, investigate

Close down the plant with the highest cost to increase profits

Set up an ABC costing system

Identify benchmarks

Compare the cost to process an order at each plant and the nature of the orders to determine if costs are out of control. If out of control, investigate

Close down the plant with the highest cost to increase profits

Explanation / Answer

Identify Benchmarks.

It will help the manager to compare the costing of his own company with peers. If anything needs to be fixed that he can do with the available data from ABM study for each process.

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