Q1Flinders Company has two service departments, Factory Administra.docx
Activity Based Costing
1. Zero Based Budgeting (ZBB) & Activity Based Costing (ABC) simple as 123... Optimise- GB
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8. What are the types of costs that need to be considered? Optimise -GB
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11. Calculating variable costs - Administration costs Through ABC and ZBB you identify the required activities and assign costs In other budgeting techniques you would roll the costs forward incrementally based on previous trends however this is not best practice Optimise -GB January February March Q1 Book keeping £500 £500 £500 £1,500 Marketing £1,000 £500 £0 £1,500 Stationery £250 £150 £100 £500 Admin costs £1,750 £1,150 £600 £3,500
12. Fixed costs Fixed costs are not linear to sales volumes. For instance the monthly rent of £30,000 will not change if sales double from the previous month. It may be argued that power is variable, but this is only true for manufacturing companies that utilise a substantial amount of power for their machines to function. Optimise -GB
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14. Forming the Budget Through ABC and ZBB Optimise- GB January February March Q1 Revenue £30,000 £90,000 £120,000 £240,000 Staff costs £1,500 £3,000 £4,500 £9,500 PC costs £14,400 £43,200 £57,600 £115,200 Admin costs £1,750 £1,150 £600 £3,500 Power £1,000 £1,000 £1,000 £3,000 Rent £10,000 £10,000 £10,000 £30,000 Total Costs £28,650 £58,350 £73,700 £160,700 Profit £1,350 £31,650 £46,300 £79,300
15. You should now be able to create budgets using ABC and ZBB that reflect your business plans accurately Optimise- GB
![Benefits of using ABC and ZBB together ,[object Object],[object Object],[object Object],Optimise -GB](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)