6ManagerialAccounting-Student_财务管理_经管

,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,6-,54,Activity-Based Costing:A Tool to Aid Decision Making,ActivityBased Costing (ABC),ABC is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity, and therefore, affect “fixedas well as variable costs.,ABC is a,good,supplement,to our traditional cost system,I agree!,Learning Objective 6-1,Understand activity-based costing and how it differs from a traditional costing system.,How Costs are Treated UnderActivityBased Costing,ABC differs from traditional cost accounting in three ways.,Manufacturingcosts,ABC assigns both types of costs to products.,Traditionalproduct costing,ABCproduct costing,Nonmanufacturingcosts,How Costs are Treated UnderActivityBased Costing,ABC does not assign all manufacturing costs to products.,All,Most, butnot all,Some,ABC differs from traditional cost accounting in three ways.,Manufacturingcosts,Nonmanufacturingcosts,Traditionalproduct costing,ABCproduct costing,How Costs are Treated UnderActivityBased Costing,Plantwide,Overhead,Rate,Departmental,Overhead,Rates,ActivityBased,Costing,Number of cost pools,Level of,complexity,ABC uses more cost pools.,ABC differs from traditional cost accounting in three ways.,How Costs are Treated UnderActivityBased Costing,Each ABC cost pool has itsown unique measure of activity.,Traditional cost systems usually relyon volume measures such as direct laborhours and/or machine hours to allocateall overhead costs to products.,ABC differs from traditional cost accounting in three ways.,ABC uses more cost pools.,Activity,An event that causes the consumption of overhead resources.,Activity Cost Pool,A “cost bucket in which costs related to a single activity measure are accumulated.,$,$,$,$,$,$,How Costs are Treated UnderActivityBased Costing,Activity Measure,An allocation basein an activity-basedcosting system.,How Costs are Treated UnderActivityBased Costing,The term,cost driver,is also used to refer to an,activity measure.,Simple countof,the number oftimes an activity,occurs.,Transactiondriver,A measureof the,amountof time neededfor an activity,.,Durationdriver,Two common types of activity measures:,How Costs are Treated UnderActivityBased Costing,How Costs are Treated UnderActivityBased Costing,Traditional cost systems usually rely on volumemeasures such as direct labor hours and/or machinehours to allocate all overhead costs to products.,ABC definesfive levels of activitythat largely do not relateto the volume of unitsproduced.,Manufacturingcompanies typically combinetheir activities into fiveclassifications.,Unit-Level,Activity,Batch-Level,Activity,Product-Level,Activity,Customer-Level,Activity,Organization-sustaining,Activity,How Costs are Treated UnderActivityBased Costing,Characteristics of Successful ABC Implementations,Strong topmanagement support,Cross-functionalinvolvement,Link to evaluationsand rewards,Baxter Battery An ABC Example,Manufacturing overhead is allocated to products usinga single plantwide overhead rate based on machine hours., Define Activities, Activity Cost Pools, and Activity Measures,At Baxter Battery, the ABC team selected the followingactivity cost pools and activity measures:,Customer Orders,- assigned all costs of resources that are consumed by taking and processing customer orders.,Design Changes,- assigned all costs of resources consumed by customer requested design changes.,Order Size,- assigned all costs of resources consumed as a consequence of the number of units produced.,Customer Relations, assigned all costs associated with maintaining relations with customers.,Other, assigned all organization-sustaining costs and unused capacity costs, Define Activities, Activity Cost Pools, and Activity Measures,Learning Objective 6-2,Assign costs to cost pools using a first-stage allocation., Assign Overhead Costs to Activity Cost Pools,Direct materials, direct labor, and shipping are excludedbecause Baxter Batterys existing cost system can directlytrace these costs to products or customer orders., Assign Overhead Costs to Activity Cost Pools,At Baxter Battery the following distribution of resource consumption across activity cost pools is determined., Assign Overhead Costs to Activity Cost Pools, Assign Overhead Costs to Activity Cost Pools,Indirect factory wages $6,000,000,Percent consumed by customer orders 30%,$1,800,000, Assign Overhead Costs to Activity Cost Pools,Factory equipment depreciation $3,500,000,Percent consumed by customer orders 20%,$ 700,000, Assign Overhead Costs to Activity Cost Pools,Learning Objective 6-3,Compute activityrates for cost pools.,Calculate Activity Rates,Now the team can compute the individual activity rates by dividing the total cost for each activity by the total activity levels.,The ABC team determines that Baxter Battery will have these total activities for each activity cost pool . . .,10,000 customer orders,4,000 design changes,800,000 machine-hours,2,000 customers served.,Calculate Activity Rates,Traced,Traced,Traced,Direct,Materials,Direct,Labor,Shipping,Costs,Overhead Costs,Cost Objects:,Products, Customer Orders, Customers,ActivityBased Costing at Baxter Battery,Direct,Materials,Direct,Labor,Shipping,Costs,Cost Objects:,Products, Customer Orders, Customers,Overhead Costs,First-Stage Allocation,CustomerOrders,OrderSize,Customer,Relations,Other,Design,Changes,ActivityBased Costing at Baxter Battery,Direct,Materials,Direct,Labor,Shipping,Costs,Cost Objects:,Products, Customer Orders, Customers,CustomerOrders,OrderSize,Customer,Relations,Other,Overhead Costs,First-Stage Allocation,Second-Stage Allocations,$/Order,$/Change,$/MH,$/Customer,Unallocated,Design,Changes,ActivityBased Costing at Baxter Battery,Learning Objective 6-4,Assign costs to a cost object using a second-stage allocation.,Baxter Battery Information,SureStart,Requires no new design resources.,800,000 batteries ordered with 4,000 separate orders.,Each SureStart requires 36 minutes of machinetime for a total of 480,000 machine-hours.,LongLife,Requires new design resources.,400,000 batteries ordered with 6,000 separate orders.,4,000 custom,designs prepared.,Each LongLife requires 48 minutes of machinetime for a total of 320,000 machine-hours.,Assigning Overhead to Products,Assigning Overhead to Products,Lets take a look at how Baxter Batterys system works for just one of the 2,000 customers Acme Auto Parts who placed a total of twelve orders. Note that the four orders for LongLifes required a design change.,Orders,Eight orders for 60 SureStarts per order.,Four orders for 50 LongLifes per order.,Machine-hours,The 480 SureStarts required 288 machine-hours.,The 200 LongLifes required 160 machine-hours.,Assigning Overhead to Customers,Assigning Overhead to Customers,Learning Objective 6-5,Use activity-based costing to compute product and customer margins.,Prepare Management Reports,Product Margin Calculations,The first step in computing product margins is togather each products sales and direct cost data.,Prepare Management Reports,Product Margin Calculations,The second step in computing product margins is toincorporate the previously computed activity-basedcost assignments pertaining to each product.,Prepare Management Reports,Product Margin Calculations,The third step in computing product margins is to deduct each products direct and indirect costs from sales.,Product Margin Calculations,The product margins can be reconciled with the companys net operating income as follows:,Prepare Management Reports,Prepare Management Reports,Customer Margin Analysis,The first step in computing Acme Auto Parts customer margin is to gather its sales and direct cost data.,Prepare Management Reports,Customer Margin Analysis,The second step is to incorporate Acme Auto Parts previously computed activity-based cost assignments.,Prepare Management Reports,Customer Margin Analysis,The third step is to compute Acme Auto Parts customer margin of $384 by deducting all its direct and indirect costs from its sales.,Product Margins Computed Using the Traditional Cost System,The first step in computing product margins is togather each products sales and direct cost data.,Plantwide manufacturing,overhead rate,$14,000,000,800,000 MH,= $17.50 per machine-hour,=,The second step in computing product margins is to compute the plantwide overhead rate.,Product Margins Computed Using the Traditional Cost System,The third step in computing product margins isallocate manufacturing overhead to each product.,480,000 hours $17.50 per hour = $8,400,000,Product Margins Computed Using the Traditional Cost System,The fourth step is to actuallycompute the product margins.,Product Margins Computed Using the Traditional Cost System,The traditional costsystem,overcosts,theSureStarts and reports a,lower,productmargin for this product.,The traditional costsystem,undercosts,theLongLifes and reportsa,higher,productmargin for this product.,Differences Between ABC and Traditional Product Costs,Differences Between ABC and Traditional Product Costs,Traditional,costing allocates all manufacturing overhead to products. ABC costing only assigns manufacturing overhead costs consumed by products to those products.,There are three reasons why thereported product margins for the twocosting systems differ from one another.,Differences Between ABC and Traditional Product Costs, Traditional,costing allocates all manufacturing overhead costs using a volume-related allocation base. ABC costing also uses non-volume related allocation bases.,There are three reasons why thereported product margins for the twocosting systems differ from one another.,Differences Between ABC and Traditional Product Costs, Traditional costing disregards selling and administrative expenses because they are assumed to be period expenses. ABC costing directly traces shipping costs to products and includes nonmanufacturing overhead costs caused by products in the activity cost pools that are assigned to products.,There are three reasons why thereported product margins for the twocosting systems differ from one another.,Targeting Process Improvement,Activity-based management is used in conjunction with ABC to identify areas that would benefit from process improvements.,While the theory of constraints approach discussed in Chapter 1is a powerful tool for targeting improvement efforts, activity rates can also provide valuable clues on where to focus improvement efforts.,Benchmarking,can be used to compare activity cost information with world-class standards of performance achieved by other organizations.,Activity-Based Costing and External Reporting,Most companies do not use ABCfor external reporting because . . .,External reports are less detailed than internal reports.,It may be difficult to make changes to the companys accounting system.,ABC does not conform to GAAP.,Auditors may be suspect of the subjective allocation process based on interviews with employees.,ABC Limitations,Substantial resourcesrequired to implementand maintain.,Resistance tounfamiliar numbersand reports.,Desire to fullyallocate all coststo products.,Potentialmisinterpretation ofunfamiliar numbers.,Does not conform toGAAP. Two costingsystems may be needed.,End of Chapter 6,