Case Classic Pen Company Activity Based Costing. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization a...
Deskripsi singkat simulasi penerapan ABC pada organisasi pemerintahan (KPKNL)
Activity Based CostingDeskripsi lengkap
Cost
ACTIVITYFull description
Activity-based costing (ABC) is a technique to more accurately assign the indirect and direct resources of an organization to the activities performed based on consumption. In the first stag…Full description
Cost engineering
Calculations of the Classic Pen CaseFull description
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Classic Pen Case
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Materi Activity Based CostingFull description
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Activity Based Costing Costing Case Based on Classic Pen Company* with extensions Classic Pen Company: Developing an ABC Model, Harvard Business chool, eptem!er "#, "$$% Walnut+ Herlu& 'rolles (e) + D-./0 1dense Denmar2
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Case !ac2ground •
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Classic Pen was a low.cost producer o& traditional Blue and Blac2 in2 pens Classic Pen had a pro8t margin o& at least 09 o& sales / years earlier. introduced ed Pens using same technology at 9 premium ecently, introduced Purple Pens using same technology at "09 premium7
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Case !ac2ground ;ssues &acing the Management •
;ssue " . Pro8ta!ility –
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;ssue . Pricing – –
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='ough >lo!al Competition? @ =Can the products !e priced !etter?
;ssue @ Product Mix –
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Process &or ed and Purple pens reuire more resources 3set.up time etc75
;ssue + @ ;nternal Processes –
A lot o& time spent on scheduling and purchasing activities
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Case !ac2ground 'he costing system o& Classic Pen was simple •
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All indirect costs were aggregated at &actory level and allocated to products !ased upon the direct la!or cost At this time the overhead rate was 009 o& direct la!or cost Be&ore new types o& pens were introduced the overhead rate was only 009 o& direct la!or cost ales cost is allocated in proportion with sales
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Case !ac2ground Product costing calculated with traditional &ull costing method
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Activity Based Costing •
Be&ore: –
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Production primarily manual 'otal indirect cost were less that the direct la!or cost Classic Pens two products were identical with respect to volume and !atch sie
Direct la!or cost and indirect cost has decreased due to automation As low volume products were introduced the result was increased demand &or: –
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;ncreased planning More setups o& machines More uality control Computers to 2eep trac2 o& )o!s and product speci8cations
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Activity Based Costing •
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ame physical output, same cost o& material 'he 8rm has approximately – –
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Property taxes, security cost and heating cost which are unchanged Much higher indirect and support costs due to the larger and more diversi8ed product mix and more complex production
1ne unit o& the high volume standard product 3!lue or !lac25 uses approximately the same amount o& direct la!or as one unit o& red or purple 'he traditional costing system would &undamentally report identical costs &or the standard and special products, independent o& production volume 'he use o& indirect and support activities !y the special products are higher that the use !y the standard products
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Activity Based Costing ABC at Classic Pen . Analysis o& the cost structure: •
;ndirect la!or –
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/09 o& the indirect la!or costs are caused !y what the controller called handling of production batches +09 o& the indirect la!or cost were caused !y the physical change &rom one color to another and were called setup costs "09 o& the time was used to an activity which the controller la!eled support activities (Parts admin.)
Computer Expenses –
09 allocated to support activities (Parts admin.) 'his is an activity which is already &ound in the catalogue o& activities as it was used to account &or the + products %09 o& computer resources were used to produce !atches and are closely related to handling of production batches •
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Activity Based Costing ABC at Classic Pen . Analysis o& the cost structure: •
'hree categories o& indirect cost remained: –
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Machine depreciation Machine maintenance Energy &or running the machines
'hese costs were incurred to maintain the production capacity &or the production o& pens7 'he Controller calls the production activities Running the machines
Activity Based Costing De8ne Activities and Activity Drivers
Activities •
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Handle Production Batches et up 'ime Parts Administration Machine upport Direct a!or Gringe ales 1rder handling -ey Account Management
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Drivers •
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Production Batches etup Hours Io7 o& Parts Machine Hours Direct a!or ales 1rders -AM Hours
Activity Based Costing Jnderstanding Activities: evels Machine expenses:
Jnit evel Activity
Handle Production uns: Activity
Batch evel
et up Expenses:
Batch evel Activity
Parts admin7 Expenses:
Product evel Activity
Gringe Expenses:
Gacility evel
ales 1rder handling:
Customer level
-ey Account Management: Customer level
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Activity Based Costing esources and resource cost pools
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Activity Based Costing esources to activities
Machine Expenses
;ndirect la!or
Computer Expenses
Gringe !ene8ts &or D
/09+09 "09
%09 Handling
etup
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ales support
/09 /09 09 Parts Admin7
Machine upport
Direct a!or Gringe
ales 1rder handling
-ey Account Manageme nt
Activity Based Costing Data and Cost Drivers
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esults Activity cost
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esults Activity cost per cost o!)ect
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esults ;ncome tatement
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esults ;ncome tatement
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1!servations •
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'o produce the new products the company has added large uantity o& overheads: Computer systems and support expenses o the overheads to the new products are high under ABC7
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