Chapter 08 SAP

7/23/2019 Chapter 08 SAP

http://slidepdf.com/reader/full/chapter-08-sap 1/41

ChapterChapter

88

Activity-BasedActivity-Based

CostingCosting



8-2

Learning ObjectivesLearning Objectives

4. Explain how activity-based costing and a two-stageprodct syste! are related.

". Explain how a two-stage prodct costing syste!wor#s.

$. Co!pare and contrast plantwide and depart!entallocation !ethods.

%. Co!pte prodct costs sing activity-basedcosting.

&. 'nderstand the potential e(ects o) sing reported

prodct costs )or decision !a#ing.

*. Co!pare activity-based prodct costing totraditional depart!ent prodct costing !ethods.

+. ,e!onstrate the ow o) costs throgh accontssing activity-based costing.

8. Apply activity-based costing to !ar#eting andad!inistrative services.



8-3

rodct Costs and ,ecisionrodct Costs and ,ecision

/a#ing/a#ing L.O. & 'nderstand the potential e(ectso) sing reported prodct costs )or

decision !a#ing.

Remember Sammy’s Skis and Boards?

Sammy is considering droppingsnowboards.



8-4

0a!!y1s 0#is and Boards0a!!y1s 0#is and Boards

Sammy’s costs withoutsnowboards.



8-5

0a!!y1s 0#is and Boards0a!!y1s 0#is and Boards

Look at overhead

Sammy allocates $1!""" overhead to theSnowboards.

#nly $!%"" o& the overhead is avoided i& Snowboardsare not produced.



8-6

'llocate overhead costs to

departments.

'llocate departmentoverhead costs to theproducts or services.

Stage #ne

Stage (wo

2wo-0tage Allocation2wo-0tage Allocation

0yste!s0yste!s

L.O. ". Explain how a two-stage prodct costingsyste! wor#s.



8-7

)ost *ool #verhead

+ntermediate )ost *ools

)ost'llocationRule

,epartment'

,epartment B

,irect Labor-ours

achine-ours

2wo-0tage Cost Allocation2wo-0tage Cost Allocation

ContinedContined



8-8

lantwide verss ,epart!ent Allocationlantwide verss ,epart!ent Allocation

/ethod/ethodL.O. $ Co!pare and contrast plantwide and depart!ent allocation!ethods.

*lantwide 'llocation ethod'll overhead costs are recorded in onecost pool and applied to products usingone overhead allocation rate.

#ne cost pool &or the&actory

3actoryOverhead Costs

Oneallocation rate

*roducts



8-9

,epart!ent Allocation,epart!ent Allocation

#ne cost pool &or each department

#verhead costs traced to separatedepartments and applied to products usinga department allocation rate.

ac#aging,epart!entOverhead

Costs*roducts

Asse!bly,epart!ent OverheadCosts

Eachdepart!e

nt has anallocationrate



8-10

Cost Allocation An Exa!pleCost Allocation An Exa!plerodction and Cost

,ataort Arthr /an)actring3acility2hird

5arter



8-11

Cost Allocation AnCost Allocation An

Exa!pleExa!ple

rodction and Cost,ataort Arthr /an)actring

3acility2hird5arter



8-12

Cost Allocation An Exa!pleCost Allocation An Exa!ple

ContinedContined lantwide Cost

Allocationort Arthr /an)actring3acility2hird

5arter



8-13

)ost *ool #verhead

+ntermediate )ost *ools

)ost'llocationRule

'ssembly *ackaging

achine-ours

,irectLabor )ost

2wo-0tage Cost Allocation2wo-0tage Cost Allocation

ContinedContined



8-14

Cost Allocation An Exa!pleCost Allocation An Exa!ple

ContinedContined ,epart!ent Cost

Allocationort Arthr /an)actring3acility2hird

5arter



8-15

Choice o) Cost AllocationChoice o) Cost Allocation

/ethod/ethod

Similar products

using sameresources

ultiple productsusing resourcesdi/erently

0hich cost allocation method is appropriate?

*lantwide'llocation

,epartment'llocation

8 16



8-16

Activity-Based CostingActivity-Based Costing

6ABC76ABC7 L.O. 4 Explain how activity-based costingand a two-stage prodct syste! are

related.

)osting method that rst assigns costs toactivities and then allocate them to

products based on the products’consumption o& activities.

Stage #ne 'ssign costs to activities

Stage (wo 'llocate costs to products basedon the use o& each activity

'ctivity2Based )osting

8 17



8-17

'ctivities

consumeresources

*roductsconsumeactivities

ABC ContinedABC Contined

8 18



8-18

1. +denti&y the activities that consumeresources and assign costs to them.

3. +denti&y the cost driver4s5 associated with

each activity.

6. )ompute a cost rate per cost driver unitor transaction.

%. 'llocate costs to products by multiplyingthe cost driver rate by the volume o& costdriver units consumed by the product.

,eveloping Activity-Based,eveloping Activity-Based

CostingCosting

8 19



8-19

Cost ,riversCost ,rivers

7actors that cause or 8drive9 an activity’scosts.

*reparing ca&eteria &ood :umber o& students in the

dorm (aking customer orders :umber o& orders

Setting up e;uipment :umber o& set2ups

*urchasing materials :umber o& purchase orders

+dentied activity +dentied cost driver

8 20



8-20

Cost AllocationCost Allocation

oolsoolslantwide

One pool

,epart!ent

As !any poolsasdepart!ents

ABC As !any poolsas activities andcost drivers

identied

8 21



8-21

Cost Allocation oolsCost Allocation ools

ABCABC)ost 7low ,iagram< 'ctivity2Based )ostingSystem

Set2uphours

*roductionruns

achinehours

Shipments

#verhead

Set2up -andleaterial

*ack =Ship

*roducts

achine

'ssign costs toactivities

'llocate

costs toproductsbased onthe use o&eachactivity

8 22



8-22

Cost 9ierarchyCost 9ierarchy)lassication o& cost drivers into general

levels o& activity> volume! batch! productand so on.

8 23



8-23





8 25



8-25



8 26



8-26



8-27



8-27

ABC Exa!pleABC Exa!pleL.O. % Co!pte prodct costs sing activity-basedcosting. rodction and Cost

,ataort Arthr /an)actring3acility2hird

5arter

8-28



8-28

ABC Exa!ple ContinedABC Exa!ple Contined

+denti&y the activitiesStep 1

8-29



8 29


+denti&y the cost drivers and theepected volume o& each cost driver.Step 3

8-30



8 30


)ompute the )ost ,river RatesStep 6Overhead Cost,ataort Arthr /an)actring

3acility 2hird5arter

8-31



8 31


Step%

'llocate costs to products

8-32



8 32


8-33



8 33

Cost 3low ,iagra!Cost 3low ,iagra!Cost 3low,iagra!Activity-Based Costing 0yste!

ort Arthr /an)actring3acility

,irect costs #verhead costs

'ssembl

y

*ackaging

'ssemble -andleaterial

Set2up

+nspect= *ack

Ship

@6* @*

8-34



8 34

rodct Cost /ethods Arodct Cost /ethods A

Co!parisonCo!parisonL.O. * Co!pare activity-based prodct costing totraditional depart!ent prodct costing !ethods.

Comparison of Reported Unit Product Costs

8-35



Overhead Costs singOverhead Costs sing

ABCABC L.O. + ,e!onstrate the ow o) costs throghacconts sing activity-based costing.

Let’s see 'B) cost Aow &or the'ssembly ,epartment

+t’s 2 Accont

time

8-36



'ssembly 0+* @*

aterial

+nventory

,irect /aterial Costs,irect /aterial Costs

'ssembly 0+* @6*

1!""!"""

,1!""!"""

3!%""!"""

,3!%""!"""

8-37



,irect Labor Costs,irect Labor Costs

0ages *ayable

"!"""

C""!"""

'ssembly 0+* @6*

'ssembly 0+* @*

,1!""!"""

,3!%""!"""

,L "!"""

,L C""!"""

8-38



-andling aterial

Overhead CostsOverhead Costs

Setting upachines

'ssembly 0+* @6*

'ssembly 0+* @*

,1!""!"""

,3!%""!"""

,L "!"""

,L C""!"""

'ssembling1"!""

"

6C!"""

3%!"""

#- 3%"!"""

D""!"""

6C"!"""

13"!"""

#-1!6"!""

"

8-39

) ) bl



2rans)er )ro! Asse!bly to2rans)er )ro! Asse!bly to

ac#agingac#aging

'ssembly 0+* @6*

'ssembly 0+* @*

,1!""!"""

,3!%""!"""

,L "!"""

,L C""!"""

#- 3%"!"""

#-1!6"!""

"

*ackaging 0+* @6*

*ackaging 0+* @*

3!%D"!"""

%!6"!"""

3!%D"!"""

%!6"!"""

8-40



ABC in Ad!inistrationABC in Ad!inistrationL.O. 8 Apply activity-based costing to !ar#eting andad!inistrative services.

1. +denti&y the activities that consume resources.

3. +denti&y the cost driver associated with eachactivity.

6. )ompute a cost rate per cost driver &or eachunit or transaction.

%. 'llocate costs to the marketing oradministration activity by multiplying the costdriver rate by the volume o& cost driver unitsconsumed by that activity.

(he same &our2stepprocess

8-41



Chapter 8

Chapter 08 SAP

Documents

Transcript of Chapter 08 SAP