d)

Non-valued activities are actions that are unnecessary, inefficient and have room
for improvement. These activities should be identified and eliminated. Examples of
such activities are moving materials in a factory and scheduling of work.

When it comes to the traditional, volume-based costing system, it tends to

overcost high-volume products and undercost low-volume products. This can be
proven when an ABC costing is prepared for the same products. The mishap provided
by the traditional costing is revealed in the ABC costing by clearly allocating
overhead costs to the products instead of just assigning overheads to products based
on direct labor as it is not an appropriate choice of cost driver. The main factors why
ABC costing is more appropriate for a factory with many product lines are non-unit
level overhead costs and product diversity.

Direct labor is a unit-level cost driver. Hence, using traditional costing may cause
some of the overhead costs to not be incurred during production of multiple product
lines. So, activity-based costing ensures that the most convenient cost driver for each
cost pool. Other than that, products produced by a factory are most probably different
form each other. Thus, different ratios of overhead activities are utilized. A unit-level
cost driver will not be able to pinpoint these ratios but use an average instead.

The production that comes out of an organization depends on the efficiency level
of the workforce of each department. Employees should make a habit in preparing
paperwork. In an activity-based costing (ABC) system, the documentation will help to
allocate costs of activities to product lines based on the total activity created.
Managers should interview their prime staff, analyze records, put together a
multidisciplinary project team and prepare storyboards to have a visual of identifying
goals and specifying the important activities to formulate the a reliable ABC system.

An activity-based management helps to reexamine product pricing to correlate

with the product costs presented by the ABC analysis. The management team plays a
role in identifying and removing the non-value-added activities and costs. When
identifying activities, managers should be thorough with the activity analysis,

breaking the down to specifications. Then, the performance of these activities should
constantly be measured and compared to the benchmarks that have already been set.

The management team should have the capabilities to know where to

designate their attention of company resources when attending to customers and not
simply accommodating for all. This is because some of those customers may lead to
loss-making instead. Therefore, the role of human behavior is absolutely vital in
determining the success or failure of the organization. (Hilton, 2011)