Activity-BasedCosting-ucsc.edu)andMediaServices.pptVIP

Chapter 5 Activity-Based Costing and Management Learning Objective1 Traditional, Volume-Based Product-Costing System Aerotech produces three complex printed circuit boards referred to as Mode I, Mode II, and Mode III. The following information is obtained from company records: Traditional, Volume-Based Product-Costing System Additional information includes: Traditional, Volume-Based Product-Costing System Traditional, Volume-Based Product-Costing System With these product costs, Aerotech established target selling prices (Cost × 125%). Learning Objective2 Activity Based Costing System (ABC) ABC systems follow a two-stage procedure to assign overhead costs to products. Learning Objective3 Learning Objectives3 4 Other Overhead Costs Other Overhead Costs Product Cost from ABC These are the new product costs when Aerotech uses ABC. Learning Objective5 Distorted Product Costs Both original and ABC target selling prices are based on (Cost × 125%). Can you identify any problems Aerotech is likely to face as a result of this distortion? Two Key Points A large proportion of non-unit-level activities A unit-level cost driver, such as direct labor, machine hours, or throughput, will not be able to assign the costs of non-unit-level activities accurately. Product diversity When the consumption ratios differ widely between activities, no single cost driver will accurately assign the resulting overhead costs. Learning Objective6 Cost Drivers A characteristic of an event or activity that results in the incurrence of costs. In selecting a cost driver, we must consider . . . Learning Objective7 COLLECTING ABC DATA Learning Objective8 Activity-Based Management Activity-Based Management Two-Dimensional ABC and Activity-Based Management Two-Dimensional ABC and Activity-Based Management Two-Dimensional ABC and Activity-Based Management Elimination of Non-Value-Added Costs Using ABM to Eliminate Non-Value-Added Activities and Costs Identify Activities. Identify Non-