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7/17/2019 Chap 008 ABC
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Activity-Based Costing:
A Tool to Aid Decision Making
7/17/2019 Chap 008 ABC
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ActivityBased Costing (ABC)
ABC is designed toprovide managers with
cost information forstrategic and other
decisions thatpotentially aect
capacity and therefore
aect xedas well as variable
costs.
ABC is agood supplementto our traditional
cost system
I agree!
7/17/2019 Chap 008 ABC
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Learning Objective
Understand activityUnderstand activity
based costing and howbased costing and how
it diers from ait diers from a
traditional costingtraditional costing
system.system.
7/17/2019 Chap 008 ABC
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!o" Costs are Treated #nderActivityBased Costing
ABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
ABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
Man&$act&ring
costs
on%an&$act&ring
costs
ABC assigns bot' ty*es o$ costs to *rod&cts
TraditionalTraditional*rod&ct costing*rod&ct costing
ABCABC*rod&ct costing*rod&ct costing
7/17/2019 Chap 008 ABC
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!o" Costs are Treated #nderActivityBased Costing
ABC does not assign all %an&$act&ring costs to *rod&cts
Man&$act&ring
costs
on%an&$act&ring
costs
TraditionalTraditional*rod&ct costing*rod&ct costing
ABCABC*rod&ct costing*rod&ct costing
All Most+b&tnotall
,o%e
ABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
ABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
7/17/2019 Chap 008 ABC
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!o" Costs are Treated #nderActivityBased Costing
Plantwide
OverheadRate
Plantwide
OverheadRate
DepartmentalOverhead
Rates
DepartmentalOverhead
Rates
ActivityBasedCosting
ActivityBasedCosting
Numer o cost pools
"e
velo!com
ple#ity
ABC &ses %ore cost *ools
ABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
ABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
7/17/2019 Chap 008 ABC
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!o" Costs are Treated #nderActivityBased Costing
ABC &ses %ore cost *ools
ac' ABC cost *ool 'as itso"n &ni.&e %eas&re o$ activity
ac' ABC cost *ool 'as itso"n &ni.&e %eas&re o$ activity
ABC di$$ers $ro% traditional cost acco&nting in t'ree "aysABC di$$ers $ro% traditional cost acco&nting in t'ree "ays
Traditional cost syste%s &s&ally relyTraditional cost syste%s &s&ally rely
on vol&%e %eas&res s&c' as direct laboron vol&%e %eas&res s&c' as direct labor
'o&rs and/or %ac'ine 'o&rs to allocate'o&rs and/or %ac'ine 'o&rs to allocateall over'ead costs to *rod&ctsall over'ead costs to *rod&cts
Traditional cost syste%s &s&ally relyTraditional cost syste%s &s&ally rely
on vol&%e %eas&res s&c' as direct laboron vol&%e %eas&res s&c' as direct labor
'o&rs and/or %ac'ine 'o&rs to allocate'o&rs and/or %ac'ine 'o&rs to allocateall over'ead costs to *rod&ctsall over'ead costs to *rod&cts
7/17/2019 Chap 008 ABC
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Activity An event t'at ca&ses t'econs&%*tion o$ over'eadreso&rces
ActivityCost 0ool
A 1cost b&cket2 in "'ic'costs related to a single
activity %eas&re areacc&%&lated
$
$
$ $
$$
!o" Costs are Treated #nderActivityBased Costing
7/17/2019 Chap 008 ABC
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ActivityMeas&re
ActivityMeas&re
An allocation basein an activity-based
costing syste%
An allocation basein an activity-based
costing syste%
!o" Costs are Treated #nderActivityBased Costing
T'e ter% cost driver isalso &sed to re$er toan activity %eas&re
T'e ter% cost driver isalso &sed to re$er toan activity %eas&re
7/17/2019 Chap 008 ABC
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,i%*le co&nt,i%*le co&nt
o$ t'e n&%ber o$o$ t'e n&%ber o$ti%es an activityti%es an activity
occ&rsocc&rs
Transactiondriver
A %eas&reA %eas&re
o$ t'e a%o&nto$ t'e a%o&nto$ ti%e neededo$ ti%e needed$or an activity$or an activity
D&rationdriver
%wo common types o activity measures&
!o" Costs are Treated #nderActivityBased Costing
7/17/2019 Chap 008 ABC
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!o" Costs are Treated #nderActivityBased Costing
Traditional cost syste%s &s&ally rely on vol&%eTraditional cost syste%s &s&ally rely on vol&%e%eas&res s&c' as direct labor 'o&rs and/or %ac'ine%eas&res s&c' as direct labor 'o&rs and/or %ac'ine
'o&rs to allocate all over'ead costs to *rod&cts'o&rs to allocate all over'ead costs to *rod&cts
Traditional cost syste%s &s&ally rely on vol&%eTraditional cost syste%s &s&ally rely on vol&%e%eas&res s&c' as direct labor 'o&rs and/or %ac'ine%eas&res s&c' as direct labor 'o&rs and/or %ac'ine
'o&rs to allocate all over'ead costs to *rod&cts'o&rs to allocate all over'ead costs to *rod&cts
ABC de$inesABC de$ines$ive levels o$ activity$ive levels o$ activity
t'at largely do not relatet'at largely do not relateto t'e vol&%e o$ &nitsto t'e vol&%e o$ &nits
*rod&ced*rod&ced
7/17/2019 Chap 008 ABC
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'anuacturing
companies typically cominetheir activities into ive
classiications(
)nit*"evelActivity
Batch*"evelActivity
Product*"evelActivity
Customer*"evelActivityOrgani+ation*
sustainingActivity
!o" Costs are Treated #nderActivityBased Costing
7/17/2019 Chap 008 ABC
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C'aracteristics o$ ,&ccess$&l ABC3%*le%entations
,trong topmanagement support,trong topmanagement support
Cross*unctionalinvolvement
Cross*unctionalinvolvement
"in- to evaluationsand rewards
"in- to evaluationsand rewards
7/17/2019 Chap 008 ABC
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Ba4ter Battery An ABC 4a%*le
Man&$act&ring over'ead is allocated to *rod&cts &singa single *lant"ide over'ead rate based on %ac'ine 'o&rs
Man&$act&ring over'ead is allocated to *rod&cts &singa single *lant"ide over'ead rate based on %ac'ine 'o&rs
7/17/2019 Chap 008 ABC
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De$ine Activities+ Activity Cost 0ools+ and Activity Meas&res
At Ba#ter Battery. the ABC team. selected the ollowingactivity cost pools and activity measures&
At Ba#ter Battery. the ABC team. selected the ollowingactivity cost pools and activity measures&
7/17/2019 Chap 008 ABC
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C&sto%er Orders - assigned all costs o$ reso&rcest'at are cons&%ed by taking and *rocessingc&sto%er orders
Design C'anges - assigned all costs o$ reso&rces
cons&%ed by c&sto%er re.&ested design c'anges Order ,i5e - assigned all costs o$ reso&rces
cons&%ed as a conse.&ence o$ t'e n&%ber o$ &nits*rod&ced
C&sto%er 6elations assigned all costs associated"it' %aintaining relations "it' c&sto%ers
Ot'er assigned all organi5ation-s&staining costs and&n&sed ca*acity costs
C&sto%er Orders- assigned all costs o$ reso&rcest'at are cons&%ed by taking and *rocessingc&sto%er orders
Design C'anges- assigned all costs o$ reso&rces
cons&%ed by c&sto%er re.&ested design c'anges Order ,i5e- assigned all costs o$ reso&rces
cons&%ed as a conse.&ence o$ t'e n&%ber o$ &nits*rod&ced
C&sto%er 6elations assigned all costs associated"it' %aintaining relations "it' c&sto%ers
Ot'er assigned all organi5ation-s&staining costs and&n&sed ca*acity costs
De$ine Activities+ Activity Cost 0ools+ and Activity Meas&res
7/17/2019 Chap 008 ABC
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Learning Objective 7
Assign costs to costAssign costs to cost
pools !sing a rstpools !sing a rst
stage allocationstage allocation..
7/17/2019 Chap 008 ABC
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Assign Over'ead Costs to Activity Cost 0ools
7/17/2019 Chap 008 ABC
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Direct %aterials+ direct labor+ and s'i**ing are e4cl&dedDirect %aterials+ direct labor+ and s'i**ing are e4cl&dedbeca&se Ba4ter Battery8s e4isting cost syste% can directlybeca&se Ba4ter Battery8s e4isting cost syste% can directly
trace t'ese costs to *rod&cts or c&sto%er orderstrace t'ese costs to *rod&cts or c&sto%er orders
Assign Over'ead Costs to Activity Cost 0ools
7/17/2019 Chap 008 ABC
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At Ba4ter Battery t'e $ollo"ing distrib&tion o$ reso&rcecons&%*tion across activity cost *ools is deter%ined
Assign Over'ead Costs to Activity Cost 0ools
7/17/2019 Chap 008 ABC
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Assign Over'ead Costs to Activity Cost 0ools
3ndirect $actory "ages 9+;;;+;;; 0ercent cons&%ed by c&sto%er orders ;;+;;;
3ndirect $actory "ages 9+;;;+;;; 0ercent cons&%ed by c&sto%er orders ;;+;;;
7/17/2019 Chap 008 ABC
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?actory e.&i*%ent de*reciation 9
7/17/2019 Chap 008 ABC
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Assign Over'ead Costs to Activity Cost 0ools
7/17/2019 Chap 008 ABC
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Learning Objective ;;+;;; batteries ordered "it' +;;; se*arate orders>;;+;;; batteries ordered "it' +;;; se*arate orders;+;;; %ac'ine-'o&rs
"ong"ie 6e.&ires ne" design reso&rces7 ;;+;;; batteries ordered "it' +;;; se*arate orders %in&tes o$ %ac'ineac' LongLi$e re.&ires > %in&tes o$ %ac'ine
ti%e $or a total o$
7/17/2019 Chap 008 ABC
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Assigning Over'ead to 0rod&cts
7/17/2019 Chap 008 ABC
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"et2s ta-e a loo- at how Ba#ter Battery2s system wor-s or /ustone o the 3.444 customers Acme Auto Parts who placed atotal o twelve orders( Note that the our orders or "ong"ies
re5uired a design change(
Orders ig't orders $or ; ,&re,tarts *er orderig't orders $or ; ,&re,tarts *er order
77 ?o&r orders $or @; LongLi$es *er order?o&r orders $or @; LongLi$es *er order
Orders ig't orders $or ; ,&re,tarts *er orderig't orders $or ; ,&re,tarts *er order77 ?o&r orders $or @; LongLi$es *er order?o&r orders $or @; LongLi$es *er order
'achine*hours
T'e >; ,&re,tarts re.&ired 7>> %ac'ine-'o&rsT'e >; ,&re,tarts re.&ired 7>> %ac'ine-'o&rs77 T'e 7;; LongLi$es re.&ired ; %ac'ine 'o&rsT'e 7;; LongLi$es re.&ired ; %ac'ine 'o&rs
'achine*hours
T'e >; ,&re,tarts re.&ired 7>> %ac'ine-'o&rsT'e >; ,&re,tarts re.&ired 7>> %ac'ine-'o&rs77 T'e 7;; LongLi$es re.&ired ; %ac'ine 'o&rsT'e 7;; LongLi$es re.&ired ; %ac'ine 'o&rs
Assigning Over'ead to C&sto%ers
7/17/2019 Chap 008 ABC
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Assigning Over'ead to C&sto%ers
7/17/2019 Chap 008 ABC
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Learning Objective @
Use activitybasedUse activitybased
costing to comp!tecosting to comp!te
prod!ct and c!stomerprod!ct and c!stomer
margins.margins.
7/17/2019 Chap 008 ABC
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0re*are Manage%ent 6e*orts
Product 'argin Calculations
T'e $irst ste* in co%*&ting *rod&ct %argins is togat'er eac' *rod&ct8s sales and direct cost data
7/17/2019 Chap 008 ABC
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0re*are Manage%ent 6e*orts
Product 'argin Calculations
T'e second ste* in co%*&ting *rod&ct %argins is toincor*orate t'e *revio&sly co%*&ted activity-based
cost assign%ents*ertaining to eac' *rod&ct
7/17/2019 Chap 008 ABC
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0re*are Manage%ent 6e*orts
Product 'argin Calculations
T'e t'ird ste* in co%*&ting *rod&ct%arginsis to ded&ct eac' *rod&ct8sdirect and indirect costs $ro% sales
7/17/2019 Chap 008 ABC
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Product 'argin Calculations
T'e *rod&ct %argins can be reconciled "it't'e co%*any8s net o*erating inco%e as $ollo"s:
0re*are Manage%ent 6e*orts
7/17/2019 Chap 008 ABC
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0re*are Manage%ent 6e*orts
Customer 'argin AnalysisT'e $irst ste* in co%*&ting Ac%e A&to 0arts8 c&sto%er
%argin is to gat'er its sales and direct cost data
7/17/2019 Chap 008 ABC
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0re*are Manage%ent 6e*orts
Customer 'argin AnalysisT'e second ste* is to incor*orate Ac%e A&to 0arts8
*revio&sly co%*&ted activity-based cost assign%ents
7/17/2019 Chap 008 ABC
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0re*are Manage%ent 6e*orts
Customer 'argin Analysis
T'e t'ird ste* is to co%*&te Ac%e A&to 0arts8 c&sto%er %argin o$9 by ded&cting all its direct and indirect costs $ro% its sales
7/17/2019 Chap 008 ABC
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0rod&ct Margins Co%*&ted #sing t'eTraditional Cost ,yste%
T'e $irst ste* in co%*&ting *rod&ct %argins is togat'er eac' *rod&ct8s sales and direct cost data
7/17/2019 Chap 008 ABC
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0rod&ct Margins Co%*&ted #sing t'eTraditional Cost ,yste%
Plantwide manuacturing
overhead rate
$67.444.444
844.444 '1 9 $6:(;4 per machine*hour9
T'e second ste* in co%*&ting *rod&ct %arginsis to co%*&te t'e *lant"ide over'ead rate
7/17/2019 Chap 008 ABC
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0rod&ct Margins Co%*&ted #sing t'eTraditional Cost ,yste%
T'e t'ird ste* in co%*&ting *rod&ct %argins isallocate %an&$act&ring over'ead to eac' *rod&ct
>;+;;; 'o&rs 9@; *er 'o&r 9>+;;+;;;>;+;;; 'o&rs 9@; *er 'o&r 9>+;;+;;;
7/17/2019 Chap 008 ABC
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0rod&ct Margins Co%*&ted #sing t'eTraditional Cost ,yste%
T'e $o&rt' ste* is to act&allyco%*&te t'e *rod&ct %argins
7/17/2019 Chap 008 ABC
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T'e traditional cost
syste% overcostst'e,&re,tarts and re*ortsa lo"er *rod&ct
%argin $or t'is *rod&ct
T'e traditional cost
syste% &ndercostst'eLongLi$es and re*ortsa 'ig'er*rod&ct
%argin $or t'is *rod&ct
Di$$erences Bet"een ABC and Traditional0rod&ct Costs
Di$$ B ABC d T di i l
7/17/2019 Chap 008 ABC
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Di$$erences Bet"een ABC and Traditional0rod&ct Costs
T'ere are t'ree reasons "'y t'ere*orted *rod&ct %argins $or t'e t"o
costing syste%s di$$er $ro% one anot'er
Traditional costing allocates all %an&$act&ring over'ead to *rod&cts ABC costing only assigns %an&$act&ring over'ead costs cons&%ed by *rod&cts to t'ose *rod&cts
Di$$ B t ABC d T diti l
7/17/2019 Chap 008 ABC
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Di$$erences Bet"een ABC and Traditional0rod&ct Costs
Traditional costing allocates all %an&$act&ring over'ead costs &sing a vol&%e-related allocation base ABC costing also &ses non-vol&%e related allocation bases
T'ere are t'ree reasons "'y t'ere*orted *rod&ct %argins $or t'e t"o
costing syste%s di$$er $ro% one anot'er
Di$$ B t ABC d T diti l
7/17/2019 Chap 008 ABC
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Di$$erences Bet"een ABC and Traditional0rod&ct Costs
Traditional costing disregards selling and ad%inistrative e4*enses beca&se t'ey are
ass&%ed to be *eriod e4*enses ABC costing directly traces s'i**ing costs to *rod&cts and
incl&des non%an&$act&ring over'ead costs ca&sed by *rod&cts in t'e activity cost *ools t'at are assigned to *rod&cts
T'ere are t'ree reasons "'y t'ere*orted *rod&ct %argins $or t'e t"o
costing syste%s di$$er $ro% one anot'er
7/17/2019 Chap 008 ABC
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Targeting 0rocess 3%*rove%ent
Activity-based %anage%ent is&sed in conj&nction "it' ABC toidenti$y areas t'at "o&ld bene$it
$ro% *rocess i%*rove%ents
Activity-based %anage%ent is&sed in conj&nction "it' ABC toidenti$y areas t'at "o&ld bene$it
$ro% *rocess i%*rove%ents
E'ile t'e t'eory o$ constraintsa**roac' disc&ssed in C'a*ter is a *o"er$&l tool $or targeting
i%*rove%ent e$$orts+ activity ratescan also *rovide val&able cl&es on
"'ere to $oc&s i%*rove%ent e$$orts
E'ile t'e t'eory o$ constraintsa**roac' disc&ssed in C'a*ter is a *o"er$&l tool $or targeting
i%*rove%ent e$$orts+ activity ratescan also *rovide val&able cl&es on
"'ere to $oc&s i%*rove%ent e$$orts
Benc'%arkingBenc'%arking can be &sed to co%*are activity costcan be &sed to co%*are activity costin$or%ation "it' "orld-class standards o$ *er$or%ancein$or%ation "it' "orld-class standards o$ *er$or%ance
ac'ieved by ot'er organi5ationsac'ieved by ot'er organi5ations
Benc'%arkingBenc'%arking can be &sed to co%*are activity costcan be &sed to co%*are activity costin$or%ation "it' "orld-class standards o$ *er$or%ancein$or%ation "it' "orld-class standards o$ *er$or%ance
ac'ieved by ot'er organi5ationsac'ieved by ot'er organi5ations
7/17/2019 Chap 008 ABC
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Activity-Based Costing and 4ternal 6e*orting
Most co%*anies do not &se ABC$or e4ternal re*orting beca&se
4ternal re*orts are less detailed t'an internal
re*orts
7 3t %ay be di$$ic< to %ake c'anges to t'e co%*any8sacco&nting syste%
7/17/2019 Chap 008 ABC
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ABC Li%itations
,&bstantial reso&rces,&bstantial reso&rcesre.&ired to i%*le%entre.&ired to i%*le%ent
and %aintainand %aintain
6esistance to6esistance to&n$a%iliar n&%bers&n$a%iliar n&%bers
and re*ortsand re*orts
Desire to $&llyDesire to $&lly
allocate all costsallocate all coststo *rod&ctsto *rod&cts
0otential0otential
%isinter*retation o$%isinter*retation o$&n$a%iliar n&%bers&n$a%iliar n&%bers
Does not con$or% toDoes not con$or% toFAA0 T"o costingFAA0 T"o costing
syste%s %ay be neededsyste%s %ay be needed
7/17/2019 Chap 008 ABC
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ABC Action Analysis
A**endi4 >A
7/17/2019 Chap 008 ABC
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Learning Objective
#Appendix $A%#Appendix $A%
&repare an action&repare an action
analysis report !singanalysis report !singactivitybased costingactivitybased costing
data and interpret thedata and interpret the
report.report.
7/17/2019 Chap 008 ABC
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A**endi4 >A: ABC Action Analysis
Conventional ABC analysis does notidenti$y *otentially relevant costs An
action analysis re*ort 'el*s beca&se it:
G,'o"s "'at costs 'ave been assigned to a cost object
G3ndicates 'o" di$$ic< it "o&ld be to adj&st t'ose costs in res*onse to c'anges in t'e level o$ activity
Conventional ABC analysis does notidenti$y *otentially relevant costs An
action analysisre*ort 'el*s beca&se it:
G,'o"s "'at costs 'ave been assigned to a cost object
G3ndicates 'o" di$$ic< it "o&ld be to adj&st t'ose costs in res*onse to c'anges in t'e level o$ activity
7/17/2019 Chap 008 ABC
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Constr&cting an action analysis re*ortbegins "it' t'e $irst-stage allocation *rocess
3n addition to co%*&ting an overall activityrate $or eac' activity cost *ool+ an activity
rate is co%*&ted $or eac' ty*e o$ over'eadcost t'at is cons&%ed s&**orting a given
activity
Let8s revisit t'e stage-one allocations$ro% t'e Ba4ter Battery Co%*any e4a%*le
t'at "e disc&ssed earlier
A**endi4 >A: ABC Action Analysis
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A**endi4 >A: ABC Action Analysis
9+>;;+;;; H ;+;;; orders 9>; *er order
Ot'er entries in t'e table are co%*&ted si%ilarly
7/17/2019 Chap 008 ABC
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9>; *er order +;;; orders 97;+;;;Ot'er entries in t'e table are co%*&ted si%ilarly
7/17/2019 Chap 008 ABC
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9>; *er order +;;; orders 9+;>;+;;;Ot'er entries in t'e table are co%*&ted si%ilarly
7/17/2019 Chap 008 ABC
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e4t+ label eac' cost &sing an ease o$ adj&st%entcode:
GFreen costs adj&st %ore or less a&to%atically to c'anges in activity level "it'o&t any action by
%anagersGIello" costs can be adj&sted to c'anges in activity level+ b&t it "o&ld re.&ire %anage%ent action to reali5e t'e c'ange in cost
G6ed costs can be adj&sted to c'anges in activity level only "it' a great deal o$ di$$ic<y and "it' %anage%ent intervention
A**endi4 >A: ABC Action Analysis
7/17/2019 Chap 008 ABC
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A**endi4 >A: ABC Action Analysis
7/17/2019 Chap 008 ABC
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#sing a Modi$ied ?or% o$ Activity-BasedCosting to Deter%ine 0rod&ct Costs $or
4ternal 6e*ortsA**endi4 >B
7/17/2019 Chap 008 ABC
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Learning Objective
#Appendix $B%#Appendix $B%
Use activitybasedUse activitybased
costing techni'!es tocosting techni'!es tocomp!te !nit prod!ctcomp!te !nit prod!ct
costs for externalcosts for external
reports.reports.
7/17/2019 Chap 008 ABC
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A**endi4 >B
ABC *rod&ct costs:G3ncl&de organi5ation-s&staining costs and &n&sed ca*acity costsG4cl&de non%an&$act&ring costs even i$ t'ey are ca&sed by t'e *rod&cts
ABC *rod&ct costs:G3ncl&deorgani5ation-s&staining costs and &n&sed ca*acity costs
G4cl&denon%an&$act&ring costs even i$ t'ey are ca&sed by t'e *rod&cts
A %odi$ied $or% o$ activity-basedcosting can be &sed to develo* *rod&ct
costs $or e4ternal $inancial re*orts
A %odi$ied $or% o$ activity-basedcosting can be &sed to develo* *rod&ct
costs $or e4ternal $inancial re*orts
7/17/2019 Chap 008 ABC
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A**endi4 >B
,i%%ons8 3nd&stries *rovides t'e $ollo"ing in$or%ation$or t'e co%*any as a "'ole and $or its only t"o*rod&ctsJdel&4e and standard 'edge tri%%ers
7/17/2019 Chap 008 ABC
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A**endi4 >B
Ass&%ing t'at ,i%%ons8 traditional cost syste% reliesAss&%ing t'at ,i%%ons8 traditional cost syste% relieson one *redeter%ined *lant"ide over'ead rate "it'on one *redeter%ined *lant"ide over'ead rate "it'
direct labor-'o&rs (DL!s) as t'e allocation base+ t'endirect labor-'o&rs (DL!s) as t'e allocation base+ t'en
its *lant"ide over'ead rate is co%*&ted as $ollo"s:its *lant"ide over'ead rate is co%*&ted as $ollo"s:
Ass&%ing t'at ,i%%ons8 traditional cost syste% reliesAss&%ing t'at ,i%%ons8 traditional cost syste% relies
on one *redeter%ined *lant"ide over'ead rate "it'on one *redeter%ined *lant"ide over'ead rate "it'direct labor-'o&rs (DL!s) as t'e allocation base+ t'endirect labor-'o&rs (DL!s) as t'e allocation base+ t'en
its *lant"ide over'ead rate is co%*&ted as $ollo"s:its *lant"ide over'ead rate is co%*&ted as $ollo"s:
0redeter%inedover'ead rate 9@; *er DL! 9+>;;+;;;;;+;;; DL!s
7/17/2019 Chap 008 ABC
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A**endi4 >B
,i%%ons8 traditional cost syste% "o&ldre*ort &nit *rod&ct costs as $ollo"s:
,i%%ons8 traditional cost syste% "o&ldre*ort &nit *rod&ct costs as $ollo"s:
3(4 D"1 < $7(;4 per D"1
6(4 D"1 < $7(;4 per D"1
7/17/2019 Chap 008 ABC
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A**endi4 >B
T'e ABC *roject tea% at ,i%%ons 'asdevelo*ed t'e $ollo"ing basic in$or%ation
7/17/2019 Chap 008 ABC
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A**endi4 >B
Ee can calc&late t'e $ollo"ing activity rates:
#sing t'e ne" activity rates+ let8s assign over'eadto t'e t"o *rod&cts based &*on e4*ected activity
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A**endi4 >BDelu#e Product
,tandard Product
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A**endi4 >B
Activity-based &nit *rod&ct costs $or bot' *rod&ct linesActivity-based &nit *rod&ct costs $or bot' *rod&ct lines
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A**endi4 >B
Activity-based &nit *rod&ct costs $or bot' *rod&ct linesActivity-based &nit *rod&ct costs $or bot' *rod&ct lines
$6.6=4.444 > 644.444 units
$?:4.444 > 344.444 units
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A**endi4 >B
ote t'at t'e &nit *rod&ct cost o$ a ,tandard &nitote t'at t'e &nit *rod&ct cost o$ a ,tandard &nit
decreased $ro% 9@; to 9
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nd o$ C'a*ter >