Problem
When Safety-Kleen and Chrysler first introduced ABC, they both quickly discovered that many employees-from frontline workers to senior managers to entire departments-resisted. Some feared ABC would change the existing power structure. Some felt threatened because they knew ABC would reveal inefficient practices that had been hidden by the traditional cost-accounting systems. Others did not like ABC, simply because it was new. And many managers, especially those who felt ABC was being imposed on their operations, resisted because they knew installing it was a tremendous amount of work." Harvard Business Review, 1995.
Task
A. Research the Activity Based Costing (ABC) system at Chrysler and compare and contrast it with the traditional budgeting system.
B. How has the budgeting system at Chrysler improved Chrysler's operations?
C. What are the possible drivers and cost pools that would be used for the ABC costing system at Chrysler?