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Group Members:
Muhammad Hamza
Farjad Khan
Abdul Wasey
Shazmeen Khan
Nida Saeed
Course: Managerial Accounting
Analyzing How Activity-based Costing
Add Value To Project
The Concept Of Activity Based
Costing
It is the best approach which gives
actual overhead according to activities
rather than product and services on
the basis of this you can make better
and long-term decisions.
Methodology Of ABC Costing
01
It gives
actual cost
of the
product with
the help of
activities
03
It gives
multidisciplinary
view of an
organization
02
Make
secondary
costs
traceable
04
It helps
organizations
to make
major
decisions.
Evolution of activity-based costing
Direct Material
Direct Labour
Factory overhead
DM are the raw material
which company
purchases and they can
be converted into
finished goods. It is
traceable on the product.
DL is physically
traceable. DL cost
means those costs
which help in
manufacturing a
product.
FOH means total cost
of manufacturing
excluded DM and DL.
It includes all the
operating cost in the
manufacturing division
of the company.
How Does ABC Works?
In ABC, cost is
assigned to
activities, which
is then related
to products or
services.
ABC works by
means of
assigning cost
to every activity
used to create
a product or
supply a
service, after
which linking
the ones
activities to
products.
It’s more
precise way of
allocating
overhead cost
than the
conventional
value allocation
techniques.
ABC can assist
to expose
organizations
where there
might be
overheads that
they didn’t
realize about
before these
would possibly
consist of
opportunity cost
or variable cost.
ABC works in a
way make us to
identify
potential
allocation of
overhead cost
fairly and
equitably
throughout
products.
Major Advantage of ABC
ABC can track all The cost of a product
which help us to set accurate and
competitive price and increase Product’s
profitability.
Activity based costing can improve productivity by assigning a cost
to individual product.
Activity based costing identify Potential inefficiencies,
which help us to record unnecessary labor cost to the
product.
ABC plays valuable role help manager in decision making.
Increased
Profitability
Reduced
Administrative
Cost
Greater Control
Over Decision
Making
Why Activity-based Costing
Is Important
Activity-based
Costing
An organization
benefits from
activity-based
costing in four
ways:.
Enhanced
Customer
Relationship
Limitation
Of Activity
Based
Costing
Identification Of Cost Driver
A cost driver has to be
identified for each
cost pool to link cost
to activity.
01
In most businesses,
there are several cost
responses to various
cost drivers.
02
The higher the
correlation between
the cost and the cost
driver, the more
accurate the analysis
of the cost driver will
be.
03
Oraganization
Vision
Enriching Lives by
Inspiring Change
Mission
To deliver value to our
stakeholders through innovative
technology, teamwork, and by
fulfilling our social and
environmental responsibilities
Values
 Integrity
 Respect
 Passion
 Quality
 Teamwork
Business Activity
Manufacture & Sale of
Textile Products.
Key Takeaways from the Interview
05
04
03
02
01
Cost and
Management
Accounting serves
as a major element
of internal
decision-making
Cost Plus Pricing
Unless you
determine the cost
of a product, it is
impossible to set a
market-competitive
price for it
Manager
Which calculations to
perform, which factors
to incorporate while
performing costing, on
which bases the FOH
should be allocated
and what will the
ultimate results be, all
revolve around the
manager.
Most raw
materials are
imported and
costs
fluctuate
owing to
exchange
rates
The number of
operational hours
is the most
commonly utilized
cost driver
A Few Snippets Of The Interview
ABC Final.pptx
ABC Final.pptx

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ABC Final.pptx

  • 1. Group Members: Muhammad Hamza Farjad Khan Abdul Wasey Shazmeen Khan Nida Saeed Course: Managerial Accounting Analyzing How Activity-based Costing Add Value To Project
  • 2. The Concept Of Activity Based Costing It is the best approach which gives actual overhead according to activities rather than product and services on the basis of this you can make better and long-term decisions.
  • 3. Methodology Of ABC Costing 01 It gives actual cost of the product with the help of activities 03 It gives multidisciplinary view of an organization 02 Make secondary costs traceable 04 It helps organizations to make major decisions.
  • 4. Evolution of activity-based costing Direct Material Direct Labour Factory overhead DM are the raw material which company purchases and they can be converted into finished goods. It is traceable on the product. DL is physically traceable. DL cost means those costs which help in manufacturing a product. FOH means total cost of manufacturing excluded DM and DL. It includes all the operating cost in the manufacturing division of the company.
  • 5. How Does ABC Works? In ABC, cost is assigned to activities, which is then related to products or services. ABC works by means of assigning cost to every activity used to create a product or supply a service, after which linking the ones activities to products. It’s more precise way of allocating overhead cost than the conventional value allocation techniques. ABC can assist to expose organizations where there might be overheads that they didn’t realize about before these would possibly consist of opportunity cost or variable cost. ABC works in a way make us to identify potential allocation of overhead cost fairly and equitably throughout products.
  • 6. Major Advantage of ABC ABC can track all The cost of a product which help us to set accurate and competitive price and increase Product’s profitability. Activity based costing can improve productivity by assigning a cost to individual product. Activity based costing identify Potential inefficiencies, which help us to record unnecessary labor cost to the product. ABC plays valuable role help manager in decision making.
  • 7. Increased Profitability Reduced Administrative Cost Greater Control Over Decision Making Why Activity-based Costing Is Important Activity-based Costing An organization benefits from activity-based costing in four ways:. Enhanced Customer Relationship
  • 9. Identification Of Cost Driver A cost driver has to be identified for each cost pool to link cost to activity. 01 In most businesses, there are several cost responses to various cost drivers. 02 The higher the correlation between the cost and the cost driver, the more accurate the analysis of the cost driver will be. 03
  • 10. Oraganization Vision Enriching Lives by Inspiring Change Mission To deliver value to our stakeholders through innovative technology, teamwork, and by fulfilling our social and environmental responsibilities Values  Integrity  Respect  Passion  Quality  Teamwork Business Activity Manufacture & Sale of Textile Products.
  • 11. Key Takeaways from the Interview 05 04 03 02 01 Cost and Management Accounting serves as a major element of internal decision-making Cost Plus Pricing Unless you determine the cost of a product, it is impossible to set a market-competitive price for it Manager Which calculations to perform, which factors to incorporate while performing costing, on which bases the FOH should be allocated and what will the ultimate results be, all revolve around the manager. Most raw materials are imported and costs fluctuate owing to exchange rates The number of operational hours is the most commonly utilized cost driver
  • 12. A Few Snippets Of The Interview