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Uitwerkingen 'Cost Accounting' - hoofdstuk 5
[Meer zien]Voorbeeld 2 van de 52 pagina's
Voorbeeld 2 van de 52 pagina's
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Voorbeeld van de inhoud
CHAPTER 5ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
5-1 Broad averaging (or “peanut-butter costing”) describes a costing approach that uses broad
averages for assigning (or spreading, as in spreading peanut butter) the cost of resources
uniformly to cost objects when the individual products or services, in fact, use those resources in
non-uniform ways.
Broad averaging, by ignoring the variation in the consumption of resources by different
cost objects, can lead to inaccurate and misleading cost data, which in turn can negatively impact
the marketing and operating decisions made based on that information.
5-2 Overcosting may result in overpricing and competitors entering a market and taking
market share for products that a company erroneously believes are low-margin or even
unprofitable.
Undercosting may result in companies selling products on which they are in fact losing
money, when they erroneously believe them to be profitable.
5-3 Costing system refinement means making changes to a simple costing system that
reduces the use of broad averages for assigning the cost of resources to cost objects and provides
better measurement of the costs of overhead resources used by different cost objects.
Three guidelines for refinement are
1. Classify as many of the total costs as direct costs as is economically feasible.
2. Expand the number of indirect cost pools until each of these pools is more
homogenous.
3. Use the cause-and-effect criterion, when possible, to identify the cost-allocation base
for each indirect-cost pool.
5-4 An activity-based approach refines a costing system by focusing on individual activities
(events, tasks, or units of work with a specified purpose) as the fundamental cost objects. It uses
the cost of these activities as the basis for assigning costs to other cost objects such as products
or services.
5-5 Four levels of a cost hierarchy are
(i) Output unit-level costs: costs of activities performed on each individual unit of a
product or service.
(ii) Batch-level costs: costs of activities related to a group of units of products or
services rather than to each individual unit of product or service.
(iii) Product-sustaining costs or service-sustaining costs: costs of activities undertaken to
support individual products or services regardless of the number of units or batches
in which the units are produced.
(iv) Facility-sustaining costs: costs of activities that cannot be traced to individual
products or services but support the organization as a whole.
5-6 It is important to classify costs into a cost hierarchy because costs in different cost pools
relate to different cost-allocation bases and not all cost-allocation bases are unit-level. For
example, an allocation base like setup hours is a batch-level allocation base, and design hours is
a product-sustaining base, both insensitive to the number of units in a batch or the number of
units of product produced. If costs were not classified into a cost hierarchy, the alternative would
5-1
, be to consider all costs as unit-level costs, leading to misallocation of those costs that are not
unit-level costs.
5-7 An ABC approach focuses on activities as the fundamental cost objects. The costs of
these activities are built up to compute the costs of products, and services, and so on. Simple
costing systems have one or a few indirect cost pools, irrespective of the heterogeneity in the
facility while ABC systems have multiple indirect cost pools. An ABC approach attempts to use
cost drivers as the allocation base for indirect costs, whereas a simple costing system generally
does not. The ABC approach classifies as many indirect costs as direct costs as possible. A
simple costing system has more indirect costs.
5-8 Four decisions for which ABC information is useful are
1. pricing and product mix decisions,
2. cost reduction and process improvement decisions,
3. product design decisions, and
4. decisions for planning and managing activities.
5-9 No. Department indirect-cost rates are similar to activity-cost rates if (1) a single activity
accounts for a sizable fraction of the department’s costs, or (2) significant costs are incurred on
different activities within a department but each activity has the same cost-allocation base, or (3)
significant costs are incurred on different activities with different cost-allocation bases within a
department but different products use resources from the different activity areas in the same
proportions.
5-10 “Tell-tale” signs that indicate when ABC systems are likely to provide the most benefits
are as follows:
1. Significant amounts of indirect costs are allocated using only one or two cost pools.
2. All or most indirect costs are identified as output-unit-level costs (i.e., few indirect
costs are described as batch-level, product-sustaining, or facility-sustaining costs).
3. Products make diverse demands on resources because of differences in volume,
process steps, batch size, or complexity.
4. Products that a company is well suited to make and sell show small profits, whereas
products that a company is less suited to produce and sell show large profits.
5. Operations staff has significant disagreements with the accounting staff about the
costs of manufacturing and marketing products and services.
5-11 The main costs and limitations of ABC are the measurements necessary to implement the
systems. Even basic ABC systems require many calculations to determine costs of products and
services. Activity-cost rates often need to be updated regularly. Very detailed ABC systems are
costly to operate and difficult to understand. Sometimes the allocations necessary to calculate
activity costs often result in activity-cost pools and quantities of cost-allocation bases being
measured with error. When measurement errors are large, activity-cost information can be
misleading.
5-12 No, ABC systems apply equally well to service companies such as banks, railroads,
hospitals, and accounting firms, as well merchandising companies such as retailers and
distributors.
5-2
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