1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34,...
-
Upload
antony-miller -
Category
Documents
-
view
212 -
download
0
Transcript of 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34,...
![Page 1: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/1.jpg)
1
Ch 4 HomeworkCh 4 Homework
Due for class discussion
next Monday
11/1/04
4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38
![Page 2: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/2.jpg)
2
Ch 4 Activity-Based CostingCh 4 Activity-Based Costing
Manufacturing Costs: DM, DL, MOH
Difference between Traditional and ABC Costing:
how MOH determined
![Page 3: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/3.jpg)
3
Traditional MOHTraditional MOH
MOH allocated based on estimated rates and actual activity level.
MOH rate calculated based on estimated cost and estimated activity level
![Page 4: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/4.jpg)
4
Traditional (con’t) Traditional (con’t)
Calculate MOH rate
MOHr=est mfg cost/est activity level
rate based on volume meausures:
DLH, DL$, RM$, Mach Hrs
MOHa = MOHr * actual activity level
(MOHa = MOH applied)
![Page 5: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/5.jpg)
5
Traditional Costing (con’t)Traditional Costing (con’t)
Two-step allocation: costs allocated to service departments, then to production
depts., then to products Inventory valuation required by GAAP
External financial statementsFirms with simple product lines that do not
differ in volume of production
![Page 6: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/6.jpg)
6
Traditional Costing Creates Traditional Costing Creates Cost DistortionCost Distortion
Diverse products with diverse production volumes
Overallocates cost to high-volume product (underallocates to low-volume product)
![Page 7: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/7.jpg)
7
ABC to the RescueABC to the RescueActivity Based Costing (ABC)
Assigns MOH to activity centers based on cause and effect relationship
Assigns costs to products based on consumption of activities
Costs vary not only by volume, but by any identifiable resource consuming activity
(redefining variable costs)
![Page 8: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/8.jpg)
8
ABC Costing StepsABC Costing Steps
Estimate ACDR (Activity Cost-Driver Rate)
ACDR=est. activity cost/practical capacity
ACDQ=Activity Cost-Driver Quantity
MOHa= ACDR * actual ACDQ
![Page 9: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/9.jpg)
9
ABC CautionsABC Cautions
The more activity centers
the more accurate cost assignments
the more it cost to do ABC costing
the more information available to managers
![Page 10: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/10.jpg)
10
ABC CautionsABC Cautions
Must balance need for accuracy with
cost of maintaining system
and
usefulness of one more cost item
![Page 11: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/11.jpg)
11
ABC Driver TypesABC Driver Types
Transaction drivers
Duration drivers
Intensity drivers
![Page 12: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/12.jpg)
12
Capacity termsCapacity terms
Theoretical Capacity
Practical Capacity
Unused Capacity (Excess Capacity)
![Page 13: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/13.jpg)
13
ABC and Unused CapacityABC and Unused Capacity
Unused capacity costs charged to decision-making level
Primary cost reductions through ABC result in unused capacity
Success of ABC depends on management’s ability to manage unused capacity
![Page 14: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/14.jpg)
14
Customer Profitability AnalysisCustomer Profitability Analysis
Evaluate customer profitability based on customer’s consumption of marketing,
selling, and distribution costs
![Page 15: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/15.jpg)
15
Customer Profitability (con’t)Customer Profitability (con’t)
20 -80 rule: 20% of customers provide 80% of sales
Customer profitability rule: most profitable 20% of customers generate
150% - 300% of profits
70% middle customers break-even
least profitable 10% of customers lose 50% - 200% profits
![Page 16: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/16.jpg)
16
Customer Profitability (con’t)Customer Profitability (con’t)
LARGE customers
are typically
either
MOST profitable
or
LEAST profitable
![Page 17: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/17.jpg)
17
Customer Profitability (con’t)Customer Profitability (con’t)
Converting Unprofitable customers into Profitable customers
Process Improvements
Activity-Based Pricing
Managing Relationships
![Page 18: 1 Ch 4 Homework Due for class discussion next Monday 11/1/04 4-25, 4-26, 4-30, 4-31, 4-33, 4-34, 4-36, 4-37, 4-38.](https://reader036.fdocuments.in/reader036/viewer/2022083009/5697bf7d1a28abf838c8457b/html5/thumbnails/18.jpg)
18
Successful ABC ElementsSuccessful ABC Elements
Clear business purpose
Commitment of Top Management
Workable ABC model
Planning and Care in handling resistance to change