This 10 page paper considers how activity based costing can be seen in action in the real world. The paper looks at a UK retail chain; British Home Stores, known a Bhs, and the way in which the switch from absorption costing to activity based costing was one of the key elements in this turnaround from a loss making company to a profitable one. The bibliography cites 8 sources.
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help a company increase their understanding of the cost basis, aid with projections that attribute overheads on a fairer basis than older more traditional absorption costing systems and empower a
company. This increased transparency creates knowledge that a company can use can make the different in terms of management decision making between a company making a profit and a company
making a loss. One company that has used management accounting as a strategic tool was BHS, a UK retailer when it was facing major difficulties in the 1990s. By
looking at the company background and then at the theoretical change the switch between abortion and activity based costing can make the real value may be appreciated. British Home Stores,
which changes its name to Bhs in the 1990s as part of a re-banding exercise to lose the negative imager it acquired during its years of difficulty in the 1990s
(Kotler, 2003). The company started in 1928 with a single store in Brixton, London. The store had low prices with the most experience item costing only 1 shilling. From the
beginning the strategy realised ion a high level of control being retained on the costs. The store was a department store including a lighting department and a cafeteria (Bhs, 2006).
In 1931 the company became a public company, and until 1945 the main strategy for competing was price only. This changed in 1945, when there was a shift to value
for money rather than price (Bhs, 2006). However to provide this there was still a major emphasis on the controlling of costs. The company grew and in 1985 started to
expand aggressively with the use of franchising, this was to be successful with stores opening in the Middle east and Europe. The company was giving an impression of strength and