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Assignment 1: Activity-based Costing (ABC) in Service Industries

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Running head: ACTIVITY BASED COSTING 1
ACTIVITY BASED COSTING
NAME:
COURSE:
COLLEGE:
TUTOR:

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ACTIVITY BASED COSTING 2
DATE: Research a U.S. company in the service industry with e-commerce activities.
The American Express Company which is also known as AmEx is one of the greatest
multinational financial services corporations that is based at Three World Financial center
Manhattan, New York, United State. The company was founded in 1850 as one of the 30
components of the Dow Jones Industrial Average (Plunkett, 2007). The company originally
begun as an express mail business that was located in Buffalo, New York during the year 1850.
AmEx is famous for its charge card, credit card and traveler’s cheque businesses. The
AmEx cards accumulate to roughly 25% of the total dollar volume of the credit card transactions
in the United States. The company was ranked as the 22
nd
most valuable brand internationally by
Interbrand and Businessweek. The company’s logo was adopted in the year 1958, which is a
centurion who image is seen on all the company’s charge cards, credit cards and travelers’
cheques.
American express company has successfully integrated with several E-commerce
activities that have greatly improved its performance. Currently, the company has designed a
payment gateway. The payment gateway allows or rather enhances the easy integration with
most of the company’s shopping carts and payment types. The Payment Gateway is designed to
simplify the integration with most sites for developers which are properly equipped with a team
of able and available affiliates to assist users with any technical issues (Plunkett, 2007).
Discuss how a time driven ABC cost system can be implemented in the company you
researched and the benefits that the use will yield to the business performance.
It is always very difficult for many organizations to implement the traditional Activity
based costing successfully due to the high cost and expenses that are incurred while

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ACTIVITY BASED COSTING 3
interviewing and surveying people for the Activity Based Costing model. Also high
expenses are incurred from the costly to validities and subjective time allocations and
also from the difficulty and problems that are associated with the maintenance and
updating of the model (Lewis, 1995).
These expenses are expensive since there are new activities that are added and also
increases occur where there is complexity and diversity of channels, individual orders
and customers. There are only two basic parameters that time driven ABC estimates, that
is;
• The time that is required in conducting or rather performing an activity or
transaction and
• The unit cost of supplying capacity
ABC has become popular and famous in business management and writing circles. AmEx
Company could implement a time driven ABC to help improve its productivity. There are key
concepts that the company has to acknowledge, that is;
• Time driven activity based costing needs less time and very minimal resources to
implement (Lewis, 1995). Thus if the company implements this, it can take only two
people in two days per month to calculate, load and validate and also report findings
compared to a ten person team who will spend over four weeks maintaining the previous
traditional activity based costing model.
• It will involve the creating of an accurate and correct time based algorithm in one facility
that will basically serve as a template that can be easily applied and customized to other
firms or companies.
The time driven ABC will be very beneficial to the company first since it requires a low cost
for its maintenance compared to the traditional ABC model that require high costs to survey and

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ACTIVITY BASED COSTINGNAME:COURSE:COLLEGE:TUTOR:DATE: Research a U.S. company in the service industry with e-commerce activities.The American Express Company which is also known as AmEx is one of the greatest multinational financial services corporations that is based at Three World Financial center Manhattan, New York, United State. The company was founded in 1850 as one of the 30 components of the Dow Jones Industrial Average (Plunkett, 2007). The company originally begun as an express mail business that was located in Buffalo, New York during the year 1850.AmEx is famous for its charge card, credit card and traveler's cheque businesses. The AmEx cards accumulate to roughly 25% of the total dollar volume of the credit card transactions in the United States. The company was ranked as the 22nd most valuable brand internationally by Interbrand and Businessweek. The company's logo was adopted in the year 1958, which is a centurion who image is seen on all the company's charge cards, credit cards and travelers' cheques.American express company has successfully integrated with several E-commerce activities that have greatly improved its performance. Currently, the company has designed a payment gateway. The payment gateway allows or rather enhances the easy integration with most of the company's shopping carts and payment types. The Payment Gateway is designed to simplify the integration with most sites for developers which are properly equipped with a team of able a ...
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