THE UNIVERSITY OF NEW SOUTH WALES
SCHOOL OF ACCOUNTING
ACCT2522 Management Accounting I
Session 1, 2010
Tutorial Week 5 - Managing Cost II: Activity Based Costing
Activity Based Costing:
We aim to explain the cost allocation problem and discuss how this
problem is resolved.
In doing this, we compare the relative merits of traditional and activity-
based costing (ABC) techniques.
We will consider how ABC information can be used for
cost management and process improvement (activity-based management - ABM).
Desired Learning Outcomes and Essential Reading
Langfield-Smith Chapter 8.
After completing this topic, you should be able to:
Explain problems associated with conventional costing systems, resulting from a failure
to adapt to the changing business environment.
Recognise the common indicators of an outdated product costing system.
Understand the views of the ABC model.
Apply and understand issues associated with ABC.
Tutorial Questions (must be prepared prior to the tutorial)
This question is adapted from CMA as found in Langfield Smith Chapter 8 (5
Queensland Electronics Company manufactures two large-screen television models, the
Novelle which has been produced for 10 years and sells for $910, and the Zodiac, a new
model introduced in early 2009, which sells for $1160. Based on the following income
statement for 2010, a decision has been made to concentrate Queensland’s marketing
resources on the Zodiac model and to begin to phase out the Novelle model.
Queensland Electric Company
for the year ended 31 December 2010
Cost of goods sold
Selling and administrative expenses
Units produced and sold
Net profit per unit sold