Class_13_MGR - MANAGERIAL ACCOUNTING IIE 211 CLASS 13 Korea...

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MANAGERIAL ACCOUNTING - IIE 211 CLASS 13 LECTURE NOTES CHAPTER 8 ACTIVITY BASED COSTING 1. REVIEW CHAPTER 8 ACTIVITY BASED COSTING 2. REVIEW CHAPTER 8 EXERCISE 3 3. REVIEW CHAPTER 8 EXERCISE 4 4. REVIEW CHAPTER 8 PROB. 22 CHAPTER 9 PROFIT PLANNING 5. REVIEW CHAPTER 9 PROFIT PLANNING HW due CLASS 14 -WEDNESDAY 1. HW: CHAPTER 8 PROBLEM 22 2. REVIEW CHAPTER 9 3. HW: CHAPTER 9 EXERCISE 3 & 4 Korea U Intranet http://iie.korea.ac.kr/intranet/ Garrison Text Site www.mhhe.com/ garrison11e eBook Text Site http://ebooks.primisonline.com 1
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MANAGERIAL ACCOUNTING - IIE 211 CLASS 13 CHAPTER 8 ACTIVITY BASED COSTING Chapter Overview A. Background. A few general comments will help set the stage for the chapter. 1. ABC and GAAP. Some ABC systems are used for external as well as for internal financial reports. However, in most cases, a company’s ABC system is not integrated with the company’s regular costing system. We agree with experts who argue against integrating the two systems because of their very different purposes. We have chosen to emphasize the use of activity-based costing as a decision-making tool, although a number of exercises and problems at the end of the chapter permit an instructor to explore the use of ABC as an alternative to traditional costing systems for external reporting. 2. The ABC approach taken in the chapter. In practice activity-based costing comes in many variations. We have consciously combined the best elements from practice and have added some innovations of our own. As a consequence, the material in the chapter should be regarded as ABC as it should be rather than a description of ABC as it is commonly implemented in practice. B. Differences Between ABC and Traditional Costing. (Exercise 8-16) The product costs computed in this chapter differ in major ways from the product costs in Chapters 2, 3, and 4 that describe traditional costing systems. 1. Manufacturing costs in ABC. In the ABC system described in the chapter, some manufacturing costs are excluded from product costs. This treatment follows recommendations by Cooper and Kaplan and others. a. The chapter advocates excluding the costs of idle capacity from product costs, but without getting into the details of how this is done. It would be helpful, but not absolutely necessary, for your students to have read Appendix 3A, which goes into this subject in greater depth. b. We also exclude organization-sustaining costs from activity-based costing product costs. These costs will be discussed in more detail below. Basically, organization-sustaining costs are excluded from product costs because they are not caused by individual products and are not relevant in decisions concerning those products. 2
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MANAGERIAL ACCOUNTING - IIE 211 CLASS 13 2. Non-manufacturing costs in ABC. Strictly speaking, non-manufacturing costs are excluded from product costs under GAAP.
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