财务成本管理英语12.docx

1、财务成本管理英语12Activity Based Costing （ABC）对应中文教材2008年财务成本管理第十六章:作业成本计算与管理1 Activity based costingAn alternative to absorption costing is activity based costing （ABC）.ABC involves the identification of the factors （cost drivers） which cause the costs of an organizations major activities.Support overheads

2、 are charged to products on the basis of their usage of an activity.For costs that vary with production level in the short term, the cost driver will be volume related （labor or machine hours）. Overheads that vary with some other activity （and not volume of production）should be traced to products us

3、ing transaction-based cost drivers such as production runs or number of orders received.1.1 Reasons for the development of ABCThe traditional cost accumulation system of absorption costing was developed in a time when most organizations produced only a narrow range of products（so that products under

4、went similar operations and consumed similar proportions of overheads）.And overhead costs were only a very small fraction of total costs, direct labor and direct material costs accounting for the largest proportion of the costs.The benefits of more accurate systems for overhead allocation would prob

5、ably have been relatively small.In addition, information processing costs were high.In recent years, however, there has been a dramatic fall in the costs of processing information.And, with the advent of advanced manufacturing technology （AMT）,overheads are likely to be far more important and in fac

6、t direct labor may account for as little as 5% of a products cost.It therefore now appears difficult to justify the use of direct labor or direct material as the basis for absorbing overheads or to believe that errors made in attributing overheads will not be significant.Many resources are used in n

7、on-volume related support activities,（which have increased due to AMT） such as setting-up, production scheduling, inspection and data processing.These support activities assist the efficient manufacture of a wide range of products and are not, in general, affected by changes in production volume.The

8、y tend to vary in the long term according to the range and complexity of the products manufactured rather than the volume of output. The wider the range and the more complex the products, the more support services will be required. Consider, for example, factory X which produces 10,000 units of one

9、product, the Alpha, and factory Y which produces 1000 units each of ten slightly different versions of the Alpha. Support activity costs in the factory Y are likely to be a lot higher than in factory X but the factories produce an identical number of units. For example, factor X will only need to se

10、t-up once whereas Factory Y will have to set-up the production run at least ten times for the ten different products. Factory Y will therefore incur more set-up costs for the same volume of production.Traditional costing systems, which assume that all products consume all resources in proportion to

11、their production volumes, tend to allocate too great a proportion of overheads to high volume products （which cause relatively little diversity and hence use fewer support services） and too small a proportion of overheads to low volume products （which cause greater diversity and therefore use more s

12、upport services）. Activity based costing （ABC） attempts to overcome this problem.1.2 Definition of ABCActivity base costing （ABC） involves the identification of the factors which cause the costs of an organizations major activities. Support overheads are charged to products on the basis of their usa

13、ge of the factor causing the overheads.The major ideas behind activity based costing are as follows.（a） Activities cause costs. Activities include ordering, materials handling, machining, assembly, production scheduling and dispatching.（b） Producing products creates demand for the activities.（c） Cos

14、ts are assigned to a product on the basis of the products consumption of the activities.1.3 Outline an ABC systemAn ABC system operates as follows.Step 1 Identify an organizations major activities.Step 2Identify the factors which determine the size of the costs of an activity/cause the costs of an a

15、ctivity. These are known as cost drivers.A cost driver is a factor which causes a change in the cost of an activity. Look at the following examples.CostsPossible cost driverOrdering costs Number of ordersMaterials handing costs Number of production runs Production scheduling costsNumber of productio

16、n runsDispatching costs Number of dispatchesStep 3 Collect the costs associated with each cost driver into what are known as cost pools.Step 4 Charge costs to products on the basis of their usage of the activity. A products usage of an activity is measured by the number of the activitys cost driver

17、it generates.2 Absorption costing versus ABCThe following example illustrates the point that traditional cost accounting techniques result in a misleading and inequitable division of costs between low-volume and high-volume products, and that ABC can provide a more meaningful allocation of costs.2.1

18、 Example: Activity based costingSuppose that Cooplan manufactures four products, W, X, Y and Z. Output and cost data for the period justEnded are as follows.Number ofProductionruns in theMaterial costDirect labourMachineOutput unitsperiodper unithours per unithours per unit$W1022011X1028O33Y100 5201

19、1Z100 5803314Direct labour cost per hour$5Overhead costs $Short run variable costs3,080Set-up costs 10,920Expediting and scheduling costs 9,100Materials handling costs7,70030,800RequiredPrepare unit costs for each product using conventional costing and ABC.答疑编号810110101SolutionUsing a conventional a

20、bsorption costing approach and an absorption rate for overheads based on either direct labour hours or machine hours, the product costs would be as follows. W X Y Z Total $ $ $ $ $Direct material200800 2,0008,000Direct labour501505001,500Overheads* 7002,100 7,00021,000 9503,0509.50030,50044,000Units

21、 produced 1010 100 100Cost per unit$95$305$95$305* $30,800 440 hours = $70 per direct labour or machine hour.Using activity based costing and assuming that the number of production runs is the cost driver for set-up costs, expediting（5ekspidaitv加速, 派出） and scheduling costs and materials handling cos

22、ts and that machine hours are the cost drivers for short-run variable costs, unit costs would be as follows.W X Y Z Total$ $ $ $ $Direct material200 800 2,000 8,000Direct labour 50 150500 1,500Short-run variable overheads （W1） 70 210700 2,100Set-up costs （W2） 1,560 1,5603,9003,900Expediting, schedul

23、ing costs （W3） 1,300 1,3003,2503,250Materials handling costs （W4） 1,1 O0 1,1 O0 2,750 2,7504,2805,120 13,100 21,500 44,0O0Units produced1010100 100Cost per unit $428 $512 $131$215Workings1. $3,080 440 machine hours =$7 per machine hour2. $10,920 14 production runs = $780 per run3. $9,100 14 producti

24、on runs =$650 per run4. $7,700 14 production runs =$550 per runSummaryConventional costing ABC Difference per Difference inProduct unit costunit cost unit total$ $W 95428 + 333 +3,330X305512 + 207 +2,070Y 95131 + 36+3,600Z305215 - 90-9,000The figures suggest that the traditional volume-based absorpt

25、ion costing system is flawed.A. It under-allocates overheads costs to low-volume products （here, W and X） and over-allocates overheads to higher-volume products （here Z in particular）.B. It under-allocates overheads costs to smaller-sized products （here W and Y with just one hour of work needed per

26、unit） and over-allocates overheads to larger products （here X and particularly Z）.2.2 ABC versus traditional costing methodsBoth traditional absorption costing and ABC systems adopt the two stage allocation process.2.2.1 Allocation of overheadsABC establishes separate cost pools for support activiti

27、es such as despatching. As the costs of these activities are assigned directly to products through cost driver rates, reapportionment of service department costs is avoided.2.2.2 Absorption of overheadsThe principal difference between the two systems is the way in which overheads are absorbed into p

28、roducts.（a） Absorption costing most commonly uses two absorption bases （labour hours and/or machine hours） to charge overheads to products.（b） ABC uses many cost drivers as absorption bases （e.g. number of orders or despatches）. Absorption rates under ABC should therefore be more closely linked to the causes of overhead costs.2.3 Cost driversThe principal idea of ABC is to focus attention on what causes costs to increase, is the cos