Lecture No. 4 ABC Costing

Lecture No. 4 ABC Costing - Activity Based Costing Lecture...

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Activity Based Costing Lecture No. 4 AC 206 – Managerial Accounting
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Overview of Lecture Reason for ABC costing Factors supporting an ABC system Cost flows Steps in implementation Examples
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Need for ABC Approach Single allocation rate not sufficient Currently many firms must target price their products ABC assists in target pricing Advent of high speed computing power made ABC feasible
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Environmental Factors Supporting ABC Approach High levels of competition Very diverse product mix Low cost of measurement for additional data required
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Traditional Allocation Method Purchasing Purchasing Warehousing Warehousing Engineering Engineering Maintenance Maintenance Product Product B B Product Product A A Direct Labor Hours
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Cost Flow Schematic Warehouse Maintenance Purchasing Engineering Product A Product B Purchase Orders No. of Receipts No. of Hours No. of Hours
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Identify the cost objectives Identify the direct costs of the products
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Lecture No. 4 ABC Costing - Activity Based Costing Lecture...

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