Ch 7 Slides.pdf

Ch 7 Slides.pdf - 8-lActivity-Based Costing: ATool to Aid...

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Unformatted text preview: 8-lActivity-Based Costing: ATool to Aid Decision MakingChapter SevenLearning Objective 1areCosABC drffers from traditional cost accounting in three waysare lreaActivity-Based GostiABC differs from traditional cost accounting in three waysO ABC assigns both types of costs to productsareCostiABC differs from traditional cost accounting in three=gCLoooEoJNumber of cost poolsActivity Based Costing (ABC)ABC is designed toprovide managers withcost information forstrategic and otherdecisions thatpotentially affectcapacity and thereforeaffect fixed as well asvariable costs.8-2areActiCosABC differs from traditional cost accounting in three waysEach ABC cost pool has itsown unique measure of activityl*",,n"t*rr"r*Activity consumptron of overhead I,-G\A "cost bucket' in which@sts related to a particularaciivity reasure areareGostiThe term cost driver isalso used to refer toan activity measureAn allocation basein an activ$-basedcosting system.ow Gosts are TreaTwo common types of activity measures:areActivProduct-LevelActivityOrganization-sustainingActivityCustomer-LevelActivityUnit-Level Batch-LevelActivity Activity\,__,--,----- /X---<-.,' Manufacturing \, companies typically combine \8-3ABC lmolementationsClassic Brass - An ABC ExampleManuftrtunng overiad is all@ted to prcducls usira sinqle olantwide ovedad rate bapd m machr'ne hdrsClasdc Braslncome ShtementYear Ended Oecember 31, 2005SalesCog of goods eldDiFd mateialsDiFd laborManufaduaing overheadGros maqinSelling and adminisrative expen*sShipping expen*sMarketing erpenesGeneral admaniSative expenesf,lt operatinq los5 3,2oo,ooo5 975,00035'l,2sO1.000,000 2,326,2fi873,75065 000300 000510 000875,000t (1,250)ostand Activity MeasuresAt Classic Brass, the ABC team, selected the followingactivity cost pools and activity measures:Pool Acti,tt& MEqs.iqCustomer Orders - assrgned all costs of resourcesthat are consumed by taking and processingcustomer orders.Product Designs - assigned ail costs of resourcesconsumed by designing productsOrder Size - assigned all costs of resourcesconsumed as a consequence of the number of unilsproducedCustomer Relations - assigned all costs associatedwith maintaining relations with customersOther - assigned all overhead costs that are notassociated with the other cost pools.Learning Objective 2Overhead Cosas at Clasdc Bras(Manufacturing and Nonmanufac'turing)Production Departmentlndirect lactory wages 5 500,0mFac{oryequipmentdepreciation 3m,0mFaciory utilities 120,000Fastory building leae 80,000 $ 1,000,000General Adm ini*rative DeparimentAdminisarative wages and $lariesOflice equipment depreciationAdminiSrative building leaeMarketing DepartmeniMarketing wages and slariesSelling expenesTgtal overhead costs250,0m,100,00o50,00060,000 510 m08-4Overhead Cosls at Clasdc Bras(Manutacturing rnd Nonmanutac{uring)Production DpartnentlndiEct factory wages 3 5m,0q,FrctoryequipmentdepFciation 3m,0d,F.ctory utilitis 120,0mFaclory building leae 80,0m t 1,m0'000Gcngrrl Adminisfative DcPartmetrt...
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Ch 7 Slides.pdf - 8-lActivity-Based Costing: ATool to Aid...

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