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The bicycle business company uses 25% of the warehouse and brings in 11.76% of the total sales for this company. In allocating the expenses between these two businesses one will need to implement a new accounting system. The ABC (activity based costing) system will work well within this company. This system will first take into account all indirect resource costs for the company. It will then assign costs of activities within the two businesses. (Horngren, Sundem, and Stratton, 2005) Looking more closely at the company one sees that things need to be taken a step further by utilizing the two-stage ABC System...
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