成本与管理会计亨格瑞第13版英文版CA05.ppt

1、Activity-Based Costing and Activity-Based Management,CHAPTER 5,LEARNING OBJECTIVES,Explain how broad averaging undercosts and overcosts products or services Present three guidelines for refining a costing system Distinguish between simple and activity-based costing systems Describe a four-part cost

2、hierarchy Cost products or services using activity-based costing Explain how activity-based costing systems are used in activity-based management Compare activity-based costing systems and department costing systems Evaluate the costs and benefits of implementing activity-based costing systems,Struc

3、ture of Lecture,Under- and over-costing why it happens? Activity Based Costing (ABC) Indicators of need for ABC ABC system Difference between ABC and Traditional Product Costs Activity Based Management (ABM) Value and non-value added costs,LEARNING OBJECTIVE 1 Explain how broad averaging undercosts

4、and overcosts products or services,Background,Easy to trace Direct materials and direct labor costs Overhead cannot be traced easily and must be allocated with estimates. Recall that Factory Overhead is applied to production in a rational and systematic manner, using some type of averaging. There ar

5、e a variety of methods to accomplish this goal.,Simple Methods Complex Methods Unrealistic Realistic,Broad Averaging and Cross-subsidization,P110,Broad Averaging and Cross-subsidization,conts.,Historically, firms produced a limited variety of goods while their indirect costs were relatively small. A

6、llocating overhead costs was simple: use broad averages to allocate costs uniformly regardless of how they are actually incurred The use of broad averages in allocating indirect costs can have a number of adverse consequences. Traditional product-costing methods use a single indirect cost rate to al

7、locate costs to all products.,Broad Averaging and Cross-subsidization, conts.,Different products consume activities at different rates, traditional costing does not recognize these differences. Peanut-butter costing uses broad averages to assign (or spread) costs uniformly to cost objects. The resul

8、t can be undercosting or overcosting of products. Overcosting a product consumes a low level of resources but is allocated high costs per unit (Emmas dinner) Undercosting a product consumes a high level of resources but is allocated low costs per unit (Jamess dinner),Broad Averaging and Cross-subsid

9、ization,conts.,When a company has a situation in which undercosting or overcosting of products occurs, this is referred to as product-cost cross-subsidization. P110 The results of overcosting one product and undercosting another. The overcosted product absorbs too much cost, making it seem less prof

10、itable than it really is. The undercosted product is left with too little cost, making it seem more profitable than it really is.,The Need for ABC,Line managers do not believe the product costs reports,Marketing does not use costs reports for pricing decisions,Product-line profit margins are hard to

11、 explain,Sales are increasing, but profits are declining.,Some products that have reported high profit margins are not sold by competitors,Direct labor is a small percentage of total costs,LEARNING OBJECTIVE 2 Present three guidelines for refining a costing system,Rationale for Refining Costing Syst

12、em,Increase in product diversity,Advances in IT,Competition in markets,Increase in Indirect Costs,Strategic decision Price decision Market decision,Make trace more cost-effective Provide more data Multiple cost driver pools,Advance in product and process technology increase indirect cost, lower dire

13、ct costs,Customized products Differentiate from competitors,Guidelines for Refining a cost systems,1. Direct-cost tracing classify as many of the total costs as direct costs as is economically feasible. 2. Indirect-cost pools expand the number of cost pools until each of these pools is homogeneous.

14、3. Cost-allocation basis identify the preferred cost-allocation base for each indirect-cost pool.,Refining a Costing System,A refined cost system reduces the use of broad averages for assigning costs to resources. There are three principal reasons that have accelerated the demand for such refinement

15、s.P115 Increase in product diversity. The growing demand for customized products has led to product diversity with the result that products demand differing levels of resources.,Refining a Costing System,conts,A refined cost system reduces the use of broad averages for assigning costs to resources.

16、There are three principal reasons that have accelerated the demand for such refinements. Increase in indirect costs. With modern technology, companies have experienced a decrease in direct costs with a resulting increase in indirect costs. Competition in product markets. Markets have become more com

17、petitive, forcing managers to obtain more accurate cost information to help them make strategic decisions.,Refining a Costing System,conts,Three guidelines are presented for refining a costing system. Direct-cost tracing. Identify as many direct costs as is economically feasible. Indirect-cost pools

18、. Expand the number of cost pools so that each pool is somewhat homogeneous. Each cost in the pool has a similar cause-and-effect relationship with a single cost driver. Cost-allocation bases. The cost driver serves as the cost allocation base for each homogeneous indirect-cost pool.,LEARNING OBJECT

19、IVE 3 Distinguish between simple and activity-based costing systems,Refining a Costing System,conts,A simple costing system has few indirect (often one) cost rates and allocates costs broadly. In todays complex manufacturing environment, this can lead to inaccurate product costs. An activity-based s

20、ystem (ABC) identifies activities as fundamental cost objects. Costs are then assigned to the activities and allocated to the individual products. Simple Methods Complex Methods Unrealistic Realistic,Refining a Costing System,conts,An Example Consider an example of two products of Cactus Jelly: Regu

21、lar and Deluxe De-spined CactiCorp sells equal quantities of each Regular sells for $40 per jar, and Deluxe $50 Both products have the same Direct Materials costs Deluxe takes twice as much Direct Labor due to the extensive de-spining required,Refining a Costing System,conts,An Example, continued Ba

22、sed on the previous assumptions, costs could be allocated, based on units, as follows:,1,2,3,4,4,2,3,Refining a Costing System,conts,An Example, continued Or it could be costed differently using another cost driver, in this case, Direct Labor Hours,1,2,3,4,4,2,3,Refining a Costing System,conts,An Ex

23、ample, continued Or it could be costed using two separate cost drivers. Using multiple cost drivers is called Activity-Based Costing Drivers could be any relevant or related activity Number of Patients Number of Meals Pounds, Gallons, Barrels, Board-Feet, etc. The next slide displays cost allocation

24、 for the Cactus Jelly using two new drivers together,1,2,Refining a Costing System,conts,Refining a Costing System,conts,ABC yields different cost per unit results as compared to the previous single-driver methods:,3,Refining a Costing System,conts,An Example, concluded: Different Costs Lead to Diff

25、erent Profits,Activity-based costing,P116,Designing an ABC System,Cost Objects (e.g., products and customers),Consumption of Resources,Products Consume Activities,Activities Consume Resources,Reasoning for ABC,Activity-based costing,conts.,In order to implement activity-based costing, a seven-step p

26、rocedure should be followed.P117 Step 1:Identify the products that are the chosen cost objects. Step 2:Identify the direct costs of the products. Step 3:Select the activities and cost-allocation bases to use for allocating indirect costs to the products.,Activity-based costing,conts.,In order to imp

27、lement activity-based costing, a seven-step procedure should be followed. Step 4:Identify the indirect costs associated with each cost-allocation base (activity). Step 5:Compute the rate per unit of each cost-allocation base (activity) used to allocate indirect costs to the products. Step 6:Compute

28、the indirect costs allocated to the products.,Activity-based costing,conts.,In order to implement activity-based costing, a seven-step procedure should be followed. Step 7:Compute the total costs of the products by adding all direct and indirect costs assigned to the products. This process is not a

29、strict step-by-step procedure. You may get to one step and realize you need to revise something you did in a previous step, so you will frequently find yourself going back to a previous step in implementing an activity-based costing system.,Activity-based costing, conts.,ABC is generally perceived t

30、o produce superior costing figures due to the use of multiple drivers across multiple levels. ABC is only as good as the drivers selected, and their actual relationship to costs. Poorly chosen drivers will produce inaccurate costs, even with ABC.,LEARNING OBJECTIVE 4 Describe a four-part cost hierar

31、chy,Activity-based costing,conts.,Cost Hierarchies .In an ABC system, costs are categorized on the basis of the different types of cost drivers utilized. ABC systems commonly use a cost hierarchy having four levels. These cost drivers differ in their relationship between the indirect cost and the pr

32、oduct or service.P119 Output unit-level costs are the costs of activities performed on each individual unit of a product or service. These costs increase as the number of units produced increases.,Activity-based costing,conts.,Cost Hierarchies. These cost drivers differ in their relationship between

33、 the indirect cost and the product or service.P119 Batch-level costs are the costs of activities related to a group of units of products or services rather than the individual unit. Set-up costs are an example of batch level costs, as this cost is incurred once for each batch, regardless of the size

34、 of the batch.,Activity-based costing,conts.,Cost Hierarchies. These cost drivers differ in their relationship between the indirect cost and the product or service.P119 Product-sustaining costs (service-sustaining costs) are the costs of activities undertaken to support individual products or servic

35、es regardless of the number of units or batches produced. Design costs are an example of this type of cost.,Activity-based costing,conts.,Cost Hierarchies .These cost drivers differ in their relationship between the indirect cost and the product or service.P120 Facility-sustaining costs are the cost

36、s of activities that cannot be traced to individual products or services but support the organization as a whole. Examples of this type of cost include general administration, rent, and building security. These costs usually lack a cause-and-effect relationship between the cost and the allocation ba

37、se.,LEARNING OBJECTIVE 5 Cost products or services using activity-based costing,Activity-based costing,conts.,Another Example a major automobile manufacturer ,Plastim makes two types of lenses:a complex lens,CL5,and a simple lens,S3 . P111-113 15000 complex lens CL5,and 60000 simple lens S3 Plastim

38、plans to use 39750 direct manufacturing labor-hours,use 9750 direct manufacturing labor-hours to CL5 Indirect costs 2385000,Example for presentation: Background,Simple costing system at plastim corporation, produce S3 and CL5, p112,Molds,Modifications for kinds,molded,Finished, cleaned, and inspecte

39、d,packed,Delivered as whole,repaired,Relative with quality,Design,Manufacturing,Distribution,Customer service,1. operating at capacity 2. high-quality products results in minimal customer-service costs,Conflict between S3 and CL5,Market enforce: many competitor on s3 Price: S3, $63 New supplier,$53,

40、S3,Market enforce: No competitor Price: CL5, $137,CL5,Plastim,?,Unprofitable, give up. Lower the price or reducing the cost,profitable, enhance Produce more,Price on inventory cost, only allocate manufacturing cost,Activity-based costing,conts.,Simple Methods P113,Activity-based costing,conts.,Simpl

41、e Methods P113,complex MethodsP122,Activity-based costing,conts.,P122,Activity-based costing,conts.,Simple vs complex Methods P123,Activity-based costing,conts.,P125,Activity-based costing,conts.,Differences Between ABC and Traditional Product Costs P124,Product margins are different for four reason

42、s: Traditional costing assigns design costs to both products based on machine hours. ABC assigns product design costs to a product only if product design work is required. Traditional costing assigns customer order costs, a batch-level cost, using a unit-level allocation base, machine hours. ABC ass

43、igns these batch-level costs using a batch-level activity measure. Traditional costing assigns only manufacturing costs to products. ABC also assigns nonmanufacturing costs to products. Traditional costing assigns all manufacturing costs to products. The ABC system does not assign organization-susta

44、ining manufacturing costs to the products.,Differences Between ABC and Traditional Product Costs,Manufacturingcosts,Nonmanufacturingcosts,ABC assigns both types of costs to products.,Traditionalproduct costing,ABCproduct costing,Differences Between ABC and Traditional Product Costs,Plant wide Overhe

45、ad Rate,Departmental Overhead Rates,ActivityBased Costing,Number of cost pools,Level of complexity,ABC uses more cost pools.,Differences Between ABC and Traditional Product Costs,ABC uses more allocation bases.,Traditional Costing,Number ofAllocation Bases,ABC,Bases usuallyrely solely onvolumemeasur

46、es.,Volumemeasuresplus otherbases.,Conclusions,Each method is mathematically correct and acceptable Each method yields a different cost figure, which will lead to different Gross Margin calculations Only Overhead is involved. Total Costs for the firm remain the same they are just allocated to differ

47、ent cost objects within the firm ABC is generally perceived to produce superior costing figures due to the use of multiple drivers across multiple levels ABC is only as good as the drivers selected, and their actual relationship to costs. Poorly chosen drivers will produce inaccurate costs, even wit

48、h ABC Selection of the appropriate method and drivers should be based on experience, industry practices, as well as a cost-benefit analysis of each option under consideration,Activity-Based Costing and External Reporting,Most companies do not use ABC for external reporting because . . .,External rep

49、orts are less detailed than internal reports. It may be difficult to make changes to the companys accounting system. ABC does not conform to GAAP. Auditors may be suspect of the subjective allocation process based on interviews with employees.,LEARNING OBJECTIVE 6 Explain how activity-based costing

50、systems are used in activity-based management,Activity-Based Management,Activity-based management (ABM) is a method of management decision making that uses activity-based costing information to improve customer satisfaction and profitability.P124 Activity-based management allows companies to better

51、plan and manage their activities. ABM is defined broadly to include decisions about Pricing and product mix Cost reduction Process improvement Product design,作业成本法的二维观念,Activity-Based Management,conts.,The Role of ABC/M Tools,What ABM does,Activities,Continually Evaluate and Improve,A value-added co

52、st is a cost that customers perceive as adding value, or utility, to a product or service: Adequate memory Pre-loaded software Reliability Easy-to-use keyboards,Value-Added Costs,Reduce orEliminate,Using ABM to Eliminate Non-Value-Added Activities and Costs,Identify Activities. Identify Non-Value-Ad

53、ded Activities. Understand Activity Linkages, Root Causes, and Triggers. Establish Performance Measures. Report Non-Value-Added Costs.,Specify parts,Select vendor,Receive parts,Produce goods,Inspect finished goods,Rework defective products,Achieving Cost Reduction,Activity Reduction,Activity Elimina

54、tion,Activity Selection,Activity Sharing,Reduce Non-Value-Added Costs,Why do organizations have incentives to eliminate non-value added activities?,Competitors are constantly striving to create more value for customers at lower cost,The organization can apply the freed- up resources to value-added a

55、ctivities or distribute them to the employees of the organization.,Competition can appear quickly,Non-value Added Activities,Keys to Successfully Implementing ABC and ABM,1. Organizational Culture.,2. Top-Management Commitment.,3. Change Champion.,4. Change Process.,5. Continuing Education.,LEARNING

56、 OBJECTIVE 7 Compare activity-based costing systems and department costing systems,Compare activity-based costing systems and department costing systems,A comparison of activity-based costing systems and department costing systems P127 Companies may use costing systems that have features of ABC, such as multiple cost pools and allocation bases. If these systems do not emphasize individual activity bases, it may be a refined cost system, but cannot be called an activity-based costing system.,Compare activity-based costing systems and department costing systems ,conts.,A compari