Strategic Cost ManagementSummaryFrom redesign proposal A12, shows that the current standard costing system is unable to link parts reduction to activity reduction and cost savings . The standard cost system based on direct labor reflects the cost of A12 and is distorted. Using the ABC system, based on A12's activities allocate overhead costs to A12 who may find that A12's current overhead cost has been overestimated by the standard cost system. In the end, it was possible to identify the A12 junction box as an attractive and profitable product, which at the same time demonstrates the value of ABC. IntroductionAlice Johnson needs to make a presentation to the management team explaining how ABC can add value to the decision making process within Wilson Electronics. The presentation focuses on a cost reduction proposal as a way to demonstrate that ABC can aid decision making. This proposal is the redesign of the A12 junction box. The current standard costing system used is unable to link the reduction in the number of parts to activity reduction and cost savings, so it is a good opportunity to demonstrate the value of the activity-based costing system. Discussion 1. What is the ABC cross model? Define what is meant by product cost, process cost, and ABC's “what-if” cost modeling perspective.