Real World Application of Movie Theater Manager: Activity Based Costing

Using the below information: write 1100 words not including the 8 peer reviewed articles from (2017-2021) please use APA 7 and include the DOI in reference area:
Using Activity Based Costing to develop a real-world application paper. The application will be applied to Movie Theater Management job. Show how the Activity Based Costing would be applied to a Movie Theater in its strategic allocation of financial resources. Please also use rubric below to help guide writing:
Synthesis of Knowledge (Focus/Thesis): Student exhibits a defined and clear understanding of the assignment. Thesis is clearly defined and well constructed to help guide the reader throughout the assignment. Student builds upon the thesis of the assignment with well-documented and exceptional supporting facts, figures, and/or statements.
Foundation of Knowledge: Student demonstrates proficient command of the subject matter in the assignment. Assignment shows an impressive level of depth of student’s ability to relate course content to practical examples and applications. Student provides comprehensive analysis of details, facts, and concepts in a logical sequence.
Application of Knowledge: Student demonstrates a higher level of critical thinking necessary for graduate-level work. Student provides a strategic approach in presenting examples of problem solving or critical thinking, while drawing logical conclusions which are not immediately obvious. Student provides well-supported ideas and reflection with a variety of current and/or world views in the assignment. Student presents a genuine intellectual development of ideas throughout assignment.
Organization of Ideas/Format: Advanced Student thoroughly understands and excels at explaining all major points. An original, unique, and/or imaginative approach to overall ideas, concepts, and findings is presented. Overall format of assignment includes an appropriate introduction (or abstract), well-developed paragraphs, and conclusion. Finished assignment demonstrates student’s ability to plan and organize research in a logical sequence.
Writing Skill: Student demonstrates an excellent command of grammar, as well as presents research in a clear and concise writing style. Presents a thorough, extensive understanding of word usage. Student excels in the selection and development of a well-planned research assignment. Assignment is error-free and reflects student’s ability to write for possible high school newspaper/journal.
Research Skill: Student provides sophisticated synthesis of complex body of information in the preparation of assignment. Research provided by student contributes significantly to the development of the overall thesis. Student incorporates at least 8 quality references in assignment with APA 7 format and DOI with each reference on the reference page. Student incorporates a variety of research resources and methodology in the preparation of assignment.

ANSWER

Real World Application of Movie Theater Manager: Activity Based Costing

Introduction

Management is a very critical aspect in successful business running; poor management have always resulted in low business revenues while good management has proved to generate relatively more revenues for a business. Managers are thus tasked with roles of inventing and implementing exemplary managerial skills that will ultimately define their roles and generate substantial profits for their respective businesses. There are several managerial methodologies and aspects that can be adopted by managers to ensure successful running of activities in a business. This article discusses Activity Based Costing in running businesses; movie theater management. The article also highlights how Activity Based Costing can be implemented successfully, and the aspects that must be incorporated to achieve the set goals; the benefits of the latter are also highlighted in reference to running a movie theater.

Activity Based Costing can be described as a methodology that is used to assign indirect cost to activities and goods which are deemed to be utilized more frequently in income generation compared to the others. It works on the aspect that goods consume activities, and activities consume resources. Activity Based Costing has the capability to pinpoint those activities which generate costs, thereby able to assign costs to the subject activities. Companies like HP, Caterpillar and IBM are known to have implemented the subject method of management and hugely benefited from it (Neelakantam & Pant, 2017).  Activity Based Costing identifies the relationships among overhead activities, costs and manufactured goods, thereby, assigning costs to those goods randomly than the native costing methods.

How Activity Based Costing (ABC) Works

ABC is commonly applied in manufacturing/production organizations due to its ability to enable the availability of cost data, thus  producing closely true costs by grouping the costs sustained during the production process. An activity in this context is defined as a cost driver like machine/equipment setups. The rate of cost drive which is normally calculated by dividing the cost pool total by the cost driver, is mostly used to determine the quantity of overhead and indirect costs pointed towards a certain activity (Durana, 2019). The ABC is mostly applied in product costing, target costing, customer profitability analysis, product line profitability analysis and service pricing. It helps in getting substantial aspects of costs thus enabling organizations to set suitable pricing strategies.

The common steps in ABC calculation include identification of all activities which are used in product creation; the activities are then grouped into various pools (all costs involved in an activity), and then the total overhead of each pool is calculated. Each cost pool activity is then assigned cost drivers inform of hours or units; the cost driver rate is then determined by dividing the total overhead in every cost pool by the total cost drivers. The cost driver rate is reached at by dividing the total overhead of every cost pool by the total cost drivers; the calculated cost driver rate is then finally multiplied by the number of cost drivers to get the Activity Based Costing. The ABC system renders any transaction or activity as a cost driver. For instance, maintenance requests, purchase orders, machine setups, production orders and quality inspections are some of the transactions/events which the ABC groups as activities with the ability to generate various costs at different levels of cost measurement.

Application of ABC in Movie Theater Management

A movie theater manager can use the Activity Based Costing by identifying the activities that the theater attendant/supervisor spends time in thus being able to allocate cost accordingly. For instance, if a theater is showing three movies, the ticket seller spends more time selling tickets for movie A more than the others, he/she also might also be spending much time talking to customers rather than selling tickets. The Theater manager can decide to allocate more costs to advertisement of the certain movie to minimize the time used in convincing the customers; this will help in saving costs spent in printing tickets which end up not being sold. Assuming the theater attendant also spends roughly 20% of his time doing nothing at the station, the manager can use him/her in running other errands like production of banners and setting up the stage. The ABC in this context will help in utilizing the minimal resources he/she has to maximize the output at minimal costs (Index, 2017). The Manager will also be investing wisely since vital activities will be accorded their deserved time to ensure maximum output and achievement of the set results.

A movie theater manager through the help of Activity Based Costing is capable of improving the efficiency of the employees by identifying the time each employee spends running theater-related activities. The manager will also be able to determine those employees with less efforts and those that put extra efforts to ensure the theater achieves its targeted within a given period. The manager will be able to re-assign duties depending on the availability of work and the costs spent in running various activities. The management will filter activities based on time and significance they bring to the theater station, thereby slotting costs appropriately to enhance the growth and maximum profitability within the theater business.

Significance of Activity Based Costing

ABC has proven to create new forums for assigning overhead costs to various products, thereby enhancing cost allocation based on activities that generate substantial income. The second benefit is the ability of ABC to change the nature of many indirect costs, thus enhancing traceability of various costs such as utilities, salaries and deprecation. Finally, Activity Based Costing enables the work-ability of the costing process; majorly in different ways by expanding the quantity of cost pools used in gathering overhead costs (Wati, 2019). ABC allows the pulling of costs by activity rather than accumulating them under a large pool. Managers’ job in ensuring continuity of business and maximization of profits will be enhanced immensely by the implementation of ABC method.

Conclusion

Activity Based Costing is not a new aspect of costing in the business world, most successful companies like those already mentioned above have benefited from utilizing the extensive aspects of the ABC costing method. Managers who run various errands in attempts to generate income have the ability to make a list of preference of activities that generate income, and allocate costs appropriately. The ABC method is an aspect of costing that will enhance proper accountability of resources within an organization thus able to monitor the growth of a business from an activity-based platform. Maximization of profits come at the cost of creating time for your business by fully getting involved in the daily business running. This helps in identifying gaps and areas that require more resource allocation, and those activities that deserve to be scrapped off the daily running of the business. ABC will definitely help in the achievement of the latter.

References

A comparative study of traditional activity-based costing and time-driven activity-based costing at a University Hospital in South Korea. (2019). Research Journal of Finance and Accounting. https://doi.org/10.7176/rjfa/10-10-01

Activity-based and product development costing. (2020). Apparel Costing. https://doi.org/10.5040/9781350065437.0010

Activity-based costing in your organization. (2017). Activity Based Costing for Construction Companies, 133–159. https://doi.org/10.1002/9781119194705.ch6

Activity-based costing. (2020). Costing for the Fashion Industry. https://doi.org/10.5040/9781350078918.0016

Durana, M. (2019). Research Review on activity-based Costing System (ABC): ABC’s development, applications, challenges, and benefits. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3347713

Index. (2017). Activity Based Costing for Construction Companies, 161–165. https://doi.org/10.1002/9781119194705.index

Neelakantam, S., & Pant, T. (2017). Building a VR-based movie theater. Learning Web-Based Virtual Reality, 53–61. https://doi.org/10.1007/978-1-4842-2710-7_6

Wati, E. (2019). Activity based costing. https://doi.org/10.31227/osf.io/8snmd

What is activity-based costing? (2017). Activity Based Costing for Construction Companies, 15–37. https://doi.org/10.1002/9781119194705.ch2