Accounting
ABC at Netflix
To; CEO Netflix
From; XXXX
Re; Move to Activity-Based Costing (ABC)
Activity-based costing has the potential to increase transparency in accounts, compared to absorption costing. Activity-based costing breaks down of the different tasks into the different elements, determining the costs of each activity to create a product or service. This breakdown of costs can them be used to allocate costs for the production process and give an accurate picture of the costs associated with producing each item or serving each customer (Innes & Mitchell, 1998).
Variable costs are easy to allocate to the different products or customers, the greatest value from activity-based costing is the way that fixed, or indirect costs, can be assessed and allocated based on the actual usage. Netflix may benefit from this approach due to the high level of fixed costs and low level...
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