Push & Pull Approaches, Spoilage, Cost Allocations & Outsourcing
A. Traditionally, companies in the United States have employed a “push” manufacturing style. Studies in Activity Based Management and Quality Control have indicated that this approach is filled with many non-value-added activities, which increase overall costs and reduce profits. The “push” style is being replaced with a “pull” approach. Required: Describe the major differences between the push and pull approaches. What non-value added activities are eliminated in a pull manufacturing system?
B. What is the difference between normal and abnormal spoilage? How should they both be treated for accounting and reporting purposes? Explain.
C. Why might a company want to allocate joint costs to the joint products produced?
D. It is now common for many companies to outsource some or all of their internal support services, particularly those that require routine, straightforward procedures. Many companies are also outsourcing human resources, legal, tax and internal audit functions.