Here are the steps to solve this problem:
2. The activity rates are computed as:
Assembling units: AED. 280,000/1,000 units = AED. 280 per unit
Processing orders: AED. 310,000/250 orders = AED. 1,240 per order
Supporting customers: AED. 100,000/100 customers = AED. 1,000 per customer
Activity-Based Costing System 26
3. The table showing overhead costs for VB's 80 units and 4 orders is:
Description Amount (AED.)
Direct materials cost (80 units x AED. 180) 14,400
Direct labor cost
Activity based costing is considered to be useful only for Manufacturing Organizations whereas reality is that it is equally usefull to Service providers
the document is on Cost volume profit analysis.
(Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income.)
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
This ppt covers the following points :-
1. introduction of management accounting
2. Definition of management accounting
3. Nature, objective, tools and techniques, significance and limitations of management accounting
4. difference between financial and management accounting and also includes difference between cost and management accounting
5. management accountant and its roles
6. Management accounting organisation
Activity based costing is considered to be useful only for Manufacturing Organizations whereas reality is that it is equally usefull to Service providers
the document is on Cost volume profit analysis.
(Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income.)
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
This ppt covers the following points :-
1. introduction of management accounting
2. Definition of management accounting
3. Nature, objective, tools and techniques, significance and limitations of management accounting
4. difference between financial and management accounting and also includes difference between cost and management accounting
5. management accountant and its roles
6. Management accounting organisation
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Cost Volume Profit (CVP).
Introduction
Fixed costs
Variable costs
Semi variable costs
Contribution margin
Break even point
PV Ratio
BEP ANalysis.
break even point
Cost-volume-Profit.
A customer-centric costing system that bases all cost workings for a product from its market price. The purpose is to reduce cost of a product as low as possible to arrive at a price that would be either equal to or less than that of competitors’ product while delivering the same functionality.
This power point presentation related to process costing. which is useful to students who studying B.com, BBA,M.COM MBA etc.
It involves short notes on definition of process costing,its features,applications,difference between process costing and job costing, advantages and disadvantageous of process costing, procedure of process costing,format of process account, process losses and abnormal gain.
ICQs provide system for the assessment of risks embedded in the internal control system. Every internal auditor prepares ICQs according to his understanding of the internal control system. There are some certain common areas that are present in every organization. This ICQs deal with those common areas that are integral part of every organization's internal control system.
The most comprehensive definition of internal audit is given by the IIA, USA. It is,
"Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes."
The purpose of the presentation is to provide clarification for a better understanding of what internal audit definition, objectives, functions, stages and reporting are all about? What difference does it make in the presence of an external audit? How different is its scope from that of the external audit? How internal audit standards contribute to better performance of internal audit work and its reporting to the Board or Audit Committee?
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Cost Volume Profit (CVP).
Introduction
Fixed costs
Variable costs
Semi variable costs
Contribution margin
Break even point
PV Ratio
BEP ANalysis.
break even point
Cost-volume-Profit.
A customer-centric costing system that bases all cost workings for a product from its market price. The purpose is to reduce cost of a product as low as possible to arrive at a price that would be either equal to or less than that of competitors’ product while delivering the same functionality.
This power point presentation related to process costing. which is useful to students who studying B.com, BBA,M.COM MBA etc.
It involves short notes on definition of process costing,its features,applications,difference between process costing and job costing, advantages and disadvantageous of process costing, procedure of process costing,format of process account, process losses and abnormal gain.
ICQs provide system for the assessment of risks embedded in the internal control system. Every internal auditor prepares ICQs according to his understanding of the internal control system. There are some certain common areas that are present in every organization. This ICQs deal with those common areas that are integral part of every organization's internal control system.
The most comprehensive definition of internal audit is given by the IIA, USA. It is,
"Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes."
The purpose of the presentation is to provide clarification for a better understanding of what internal audit definition, objectives, functions, stages and reporting are all about? What difference does it make in the presence of an external audit? How different is its scope from that of the external audit? How internal audit standards contribute to better performance of internal audit work and its reporting to the Board or Audit Committee?
Capital Budgeting is about how one should evaluate the financing options based on the superior financial performance through mathematical techniques. These techniques have been discussed in the presentation in detail.
ABC is a costing system where indirect costs are assigned to products and services. The system establishes a relationship between overhead costs and production activities by allocating overhead costs to them with high precision. As a result, overhead costs are allocated more accurately based on their relevant activity levels. The system has eliminated the defects of the traditional/absorption costing system. ABC is used both as a planning tool and as a controlling instrument after the production is finished. ABC provides the basis for pricing decisions, inventory valuation, profitability analysis and overhead allocation. The system can effectively be used for both products and services.
Corporate Social Responsibility (CSR) is about how companies manage their business processes to produce an overall positive impact on society. It covers sustainability, social impact and ethics on business interests and objectives. This presentation also gives a balancing view of the commercial interests of businesses and social & environmental obligations of a business enterprise.
The ISO 26000 standard defines CSR as:
an organization's responsibility for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that:
- contributes to Sustainable Development, including health and the welfare of society;
- takes into account the expectations of stakeholders;
- is in compliance with applicable law and consistent with international norms of behavior;
- and is integrated throughout the organization and implemented in its relations.
The 6 core subjects listed by ISO 26000 are:
1. Human rights
2. Labor practices
3. The environment
4. Fair operating practices
5. Consumer issues
6. Community involvement and development
The presentation covers all aspects of CSR and provide adequate guidance on the principles and practices of CSR.
Value Analysis (VA) is a tool (technique or method) that is used for improving the value of a product or a process of understanding its constituent components and their associated costs. It aims at finding improvements to the components by reducing their cost and increasing the value of the functions of a product or a service.
A critical advantage to using a VA is its potential for reducing costs, which is a benefit that permeates all advantages of the system.
A VA breaks-down a product or service into components, it enables you to analyze each component on its own, evaluating its features and functions in detail efficiency and effectiveness.
Microfinancing is a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. The objective is uplifting the economic activity at the lowest strata of the population. The generation of economic activity would alleviate poverty through the creation of income and employment opportunities.
A VAT audit is the FTA’s assessment of a company about its responsibility as a taxable person. The audit ensures that a company has fully captured the input and output tax on its all vatable transactions. This audit is conducted to ensure that the tax liability is calculated correctly and paid in full within the stipulated timeframe. The FTA also assesses a company whether they are fulfilling all responsibilities that apply to its business as per the VAT law.
The FTA can conduct the audit within 5 years for any business, but in some circumstances, the FTA has the right to extend the time frame for the audit and record-keeping.
VAT Evasion or Fraud: Penalties & Precautions (The UAE Perspective)Ahmad Tariq Bhatti
Tax evasion or fraud refers to a case where a taxable person intentionally defrauds to pay less tax or no tax to the FTA that is lawfully due to him. With tax evasion, the taxpayer intentionally and deliberately misrepresents the tax liability to avoid paying higher taxes to the government. The government loses money as a result of this act. Therefore, the law imposes severe penalties to such taxable persons. The tax fraud necessarily includes an intention to not pay the tax. The FTA has to prove through fraud examination tests or techniques that the person held for tax evasion or fraud has been intentionally involved in this act.fraud
Life-cycle costing is a system that provides an estimate of all the costs and revenues attributable to a cost object (product, service, project or asset) from its development to its discarding or dis-lodging or discontinuing or removing or abandonment from the market.
Life-cycle costing can be applied to products, services, projects, or assets over the entire life-cycle in the market. The objective of life-cycle costing is to maximize returns over the entire life of a product, service, project or asset by minimizing costs and maximizing revenues through the application of planning, management, and controlling techniques.
Budgeting — A Framework for the Budgetary Controls SystemAhmad Tariq Bhatti
A budget is a formal statement of estimated income and expenses based on future plans and objectives. In other words, a budget is a document that management makes to estimate the revenues and expenses for an upcoming period based on their goals for the business.
A budget is basically a financial plan for a given period, normally a year. It greatly enhances the success of business undertaking.
Corporate budgets are essential for operating at cost efficiency. Aside from earmarking resources, a budget can also be helpful in setting goals, measuring outcomes and planning for contingencies.
This is a pictorial depiction of the life in Lahore during the British rule in the subcontinent. This was a time where the camera came into this region. The life and time were captured by many people during this era. We collected some of those pictures and presented them here for you. This presentation will go a long way in understanding the plight of common people especially the people who were living in the city of Lahore and its suburbs.
There is a saying, a picture is worth a thousand words. It is also believed, we are a reflection of the people who lived before us and the people coming after us will be a reflection of ours. It is also said, seeing is believing. These proverbs will come to your mind again and again while seeing this photo album.
The earliest picture starts in 1859 and the last one is around 1950, in this way more than 90 years have been covered. The photos are arranged in chronological order. We have rejected scores of photos only because the references were not available or were doubtful enough to be taken here.
We exercised due care and diligence in reporting the year of the photos, however, any mistake in writing the year of a photo is inadvertently mine, therefore, it should be excused. Any correction suggested by the viewers will be noted for the next editions.
Internal Control Questionnaires for Construction CompaniesAhmad Tariq Bhatti
Risk assessment and plugging them is key to the success of business processes. Construction companies are exposed to many kinds of risks. Correct identification of these risks is necessary for the management of such risks. We have prepared these risk assessment questionnaires from the perspective of construction companies. The coverage of issues is adequate. Hopefully, these questionnaires will be helpful in plugging key risks and drive successful business operations of construction companies. We welcome comments for improvements. Thank you.
Employee Assessment and Evaluation for Continuation of ServiceAhmad Tariq Bhatti
Trust Versus Performance Model explains the employee evaluation on the basis of two factors ie trust and performance. The model helps to retain employees on these two parameters of success.
Internal Controls are defined as a system of well designed procedures by a company’s management and top-level executives, to provide a substantial degree of assurance in achieving business objective, while complying with the policies and laws, safeguarding the assets, maintaining efficiency and effectiveness in regular operations and reliability of financial statements.
Internal Control Questionnaires are preliminary risk assessment procedures for the existence and working of the internal control system. These questionnaires are filled in the presence of the auditor. Ideally, an auditor reads these questions and a relevant area employee replies in yes or no based on his knowledge of the process.
The questionnaire is useful to determine which areas the audit should focus on more as compared to rest ones. When employees answer the questions, the auditor knows whether the company is keeping accurate records overall, and proper system of internal controls. The same area questions may be asked from different employees of the same area in order to keep the risk assessment fool proof.
Dengue or break-bone fever is a mosquito-borne disease that is caused by the biting of Dengue infected mosquito. Symptoms typically begin three to fourteen days after infection. This may include a high fever, headache, vomiting, muscle and joint pains, and a characteristic skin rash.
Salalah in Oman is exotic location for refreshing and enjoyment. Salalah green rugged hills, sea shores, historical & religious places, scenic beauty and a lot more...
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
3. In contrast to traditional/absorption costing system, ABC system
first accumulates overheads costs for each organizational activity,
and then assigns the costs of the activities to the products,
services, or customers (cost objects) causing that activity.
Activity-Based Costing System 3
4. During 1980’s, the limitations of absorption costing
system were felt with severity. Companies were looking
for a system that could reflect true product cost in order to
fight competition. The absorption costing system was
designed decades ago, when most companies produced
narrow range of products. Further, overhead costs were
small enough to make a big difference in the identification
of cost of a product. This criticism of absorption costing
led to generation of the idea of ABC system. David
Cooper and Robert Kaplan wrote articles on the idea of
ABC system in 1990 and 1992. The new system was
accepted widely and became reality of the day. Now ABC
system has become part of every management
accounting text book and being implemented the world
over.
Activity-Based Costing System 4
5. ABC is a cost attribution to cost units on the basis of benefit received
from indirect activities.
-- Cima Official Terminology
An activity is an event that incurs costs.
A cost object is defined as anything for which a separate measure of
cost is desired/required.
An activity cost pool: The overheads cost allocated to a distinct type
of activity or related activities.
A cost driver is any factor or activity that has a direct cause and effect
relationship with the resources consumed.
Cost Unit: An item of production or a service for which it is useful to
have cost information.
Cost accounting: The process of identifying, analyzing, summarizing,
recording and reporting costs associated with business operations.
Direct costs: Those costs that are directly associated with the
manufacturing process.
Indirect/overheads costs: Those costs that are not directly
identifiable with a unit of production.
Activity-Based Costing System 5
6. Direct Costing System
A system of costing the products where direct costs (also referred to as
variable costs) are assigned to products only. It reflects the contribution to
indirect costs. The system is considered appropriate for decision-making
purposes. It is recommended in the circumstances where indirect costs are a
low proportion of a company’s total costs.
Traditional or Absorption Costing System
It reflects full cost pertaining to a product. It is easy to use and, therefore, is
practiced widely. The allocation of overhead costs under the system is
based on a rate determined by either a percentage of direct labor cost or
number of labor hours worked or another. Therefore, the reported allocation
of overheads for a given product may be incorrect. It is the main defect of
absorption costing.
Activity-Based Costing System
It also reflects full cost pertaining to a product. ABC system establishes
relationships between overheads costs and activities so that we can
better allocate overheads costs. It reflects the more accurate use of
overheads costs based on their relevant activity levels achieved. The system
has eliminated the defects of traditional/absorption costing system.
Activity-Based Costing System 6
7. Spreads overheads cost over entire product range. A single
overheads recovery rate (also known as predetermined overheads
rate or overheads absorption rate) is used to absorb total overheads
cost to all production. For instance,
For job order costing, overheads cost absorption rates are normally based on
direct labor cost or direct labor hours
For process costing, overheads cost absorption rates are normally based on
machine hours worked
Results of the defect:
Each product appeared to cost the same, as far as overheads cost is
concerned
Products with high profit margins subsidized products with low profit
margins
In-accurate cost accumulation led to inaccurate profit planning of
products
A product cannot compete in the market if its cost is not accurately
accumulated and reflected in costing records 7
Activity-Based Costing System
8. An overheads cost allocation
system that:
allocates overheads cost to
multiple activity cost pools and
assigns the activity cost pools
to products or services by
means of cost drivers that
represent the activities used.
Activity-Based Costing System 8
10. Step 1 Identify Cost Objects i.e. Product A,B,C
Step 2 Identify direct costs i.e. Direct Materials, Direct Labor,
Direct expense
Step 3 Select the cost allocation bases to be used for
overheads cost i.e. # of set-ups, # of units, etc.
Step 4 Identify the overheads cost associated with the bases
selected
Step 5 Compute the rate per unit
Step 6 Compute overheads cost for allocation to products
Step 7 Compute costs of products
Activity-Based Costing System 10
11. Departments
Activity Design Setup Shipping
Overheads Cost
Pool
Cost No. of No. of No. of
Allocation employees Setup Shipments
Base Hours
Cost
Objects Product A Product B Product C
Activity-Based Costing System 11
12. Activity Cost
Activity Cost Drivers
Pools
a) Number of units
Production b) Number of set-ups
c) Number electricity units consumed
a) Number of sales personnel
Marketing b) Number of sales orders
a) Number of research projects
Research &
b) Personnel hours spend on projects
Development c) Technical complexities of the projects
a) Number of service calls
Customer Service b) Number of products serviced
c) Hours spend on servicing products
Purchasing a) Number of purchase orders
Material Handling a) Number of material requisitions
Activity-Based Costing System 12
13. Intensity
Transaction Drivers
Drivers Duration
Each overseas
Drivers purchase order
should be
# of purchase orders
# of customer orders Set up hours weighted 1.5
processed Inspection hours times of local
# of inspections Labor hours purchase order
Production hours Each overtime
performed
# of set-ups Loading hours hour shall be
charged as twice
undertaken
of the normal
wage hour
Activity Based Costing 13
14. I. Unit-level activities
The costs of direct materials, direct labor, and machine maintenance
are examples of unit-level activities.
II. Batch-level activities
are costs incurred every time a group (batch) of units is produced .
Purchase orders, machine setup, and quality tests are examples of
batch-level activities.
III. Product-line activities
Examples of product-line activities are engineering changes made in
the assembly line, product design changes, and warehousing and
storage costs for each product line.
IV. Facility support activities
The costs relating to the activities are administrative in nature and
include building depreciation, property taxes, plant security, insurance,
accounting, outside landscape and maintenance, and plant
management's and support staff's salaries.
Activity-Based Costing System 14
16. Alpha Ltd. is manufacturing two products A and B. Both products
are manufactured on the same machines and undergo the same
processes. Here is the detail of budgeted data obtained for the two
products for the financial year ending on December 31, 20x1:
Description A B
Budgeted production quantity (units) 25,000 2,500
Number of purchase orders 400 200
Number of set-ups 150 100
Resources required/unit:
Direct material (AED.) 25 62.5
Direct labor (Hours) 10 10
Machine time (Hours) 5 5
Activity-Based Costing System 16
17. Budgeted production overheads cost for the year have been calculated as
follows:
Description Amount (AED.)
Volume related overheads cost 275,000
Purchase related overheads cost 300,000
Set-up related overheads cost 525,000
Total overheads cost 1,100,000
The budgeted labor rate is AED. 20 per hour.
The company’s present system is to absorb overheads by product
units using rates per labor hour. However, the company is
considering implementing a system of activity-based costing.
Following cost drivers for overheads are used.
Volume related Machine hours
overheads
Purchase related Number of purchase
overheads orders
Set-up related overheadsCosting System
Activity-Based
Number of set-ups 17
18. Requirements:
a) Calculate the unit costs for product A and B using:
i. The absorption costing system
ii. The proposed activity-based costing system
b) Compare the results in (i) and (ii) and explain the differences.
Solution:
The first step is to determine the overheads absorption rate or cost driver
rates for each activity. Then utilize these rates to data given for each
product.
Description A B Total
Production quantity 25,000 2,500
Direct labor hours required 250,000 25,000 275,000
AED.
Total production overheads 1,100,000
Activity-Based Costing System 18
19. Description A B Total
Overhead absorption rate per labor hour (AED. AED. 4
1,100,000/275,000)
Machine hours required 125,000 12,500 137,500
Total purchase orders 400 200 600
Total set-ups 150 100 250
Cost per cost driver
Volume related overheads cost AED.
275,000
Machine hours required 137,500
Volume related overheads/machine hour (AED. 275,000/137,500) AED. 2
Purchases related overheads cost AED.
300,000
Total purchase orders 600
Purchase related overheads / order (AED. 300,000/600) AED. 500
Set-ups related overheads cost AED.
525,000
Activity-Based Costing System 19
Total set-ups 250
20. (a) (i) Unit cost working under traditional/absorption
costing system
Description of cost components A B
AED. AED.
Direct materials cost 25.00 62.50
Direct labor cost (AED. 20 x 10 labor 200.00 200.00
hours/unit)
Overheads (10 labor hours x AED. 4) 40.00 40.00
------------------ -----------------
Total cost per unit 265.00 302.50
========== ==========
Activity-Based Costing System 20
21. (a) (ii) Unit cost working under Activity-Based Costing system
Description of cost components A B
AED. AED.
Direct materials cost 25.00 62.50
Direct labor cost 200.00 200.00
Volume related overheads cost (AED. 2 x 5 machine 10.00 10.00
hours/unit)
Purchases related overheads cost:
Product A: [(AED. 500 x 400 Orders)/ 25,000 8
Units] 40
Product B: [(AED. 500 x 200 Orders)/2,500 Units]
Set-up related overheads cost:
Product A: [(AED. 2,100 x 150 Set-ups)/25,000 12.60
Units] 84.00
Product B: [(AED. 2,100 x 100 Set-ups)/25,00 Units]
------- --------
Total cost per unit Activity-Based Costing System 255.60 396.50 21
22. (b) Difference in cost per unit under two systems.
Description A B
AED. AED.
Cost as per traditional costing system 265.00 302.50
Cost as per ABC costing system 255.60 396.50
Increase/(Decrease) (9.40) 94.00
% change (3.55%) 31.07%
Explanation & Recommendation
Under Traditional Costing System, the cost of Product A is increased by AED. 9.40
per unit (i.e. 3.55%) and the cost of Product B is decreased by AED. 94 per unit
(i.e. 31.07%). These variances in cost per unit are because of inappropriate
absorption of overheads cost under Traditional Costing System. Therefore, ABC
system is highly recommended for the company, in order to book the correct
overheads cost for Products A and B.
Activity-Based Costing System 22
23. XYZ Company makes a product AD that it sells to Alpha Company. The
company has ABC system in operation that it uses for internal decision
making. The company has two overheads departments, whose costs are
listed as below:
Description Amount (AED.)
Manufacturing overheads cost 500,000
Selling and administrative overheads cost 300,000
------------------
Total overheads costs 800,000
=========
The company's ABC system has the following activity cost pools and activity
drivers in place:
Activity Cost Pool Activity Drivers
Assembling units Number of units
Processing orders Number of orders
Supporting customers Number of customers
Other Not applicable
Activity-Based Costing System 23
24. Costs assigned to other activity cost pool have no activity driver; they
consist of the costs of unused capacity and organization-sustaining costs -
neither of which are assigned to products, orders or customers.
XYZ Company distributes the costs of manufacturing overheads and of
selling and administrative overheads cost to the activity cost pools based on
employee information, the results of which are reported as below:
Assemblin Processing Supporting
Description Other Total
g Units Orders Customers
Manufacturing overheads 50% 35% 5% 10% 100%
Selling & administrative
10% 45% 25% 20% 100%
overheads
100
Total activity 1,000 units 250 orders -- --
customers
Activity-Based Costing System 24
25. Required:
1. Perform the first stage allocation of overhead costs to the activity cost
pools.
2. Compute activity rates for the activity cost pools.
3. VB is one of the XYZ’s big customers. Last year VB ordered AD four
different times. VB ordered a total of 80 units of AD during the year.
Construct a table showing the overhead costs of these 80 units and
four orders. The price per unit charged to the customer is AED. 595.
The direct materials cost per unit is estimated at AED. 180 per unit and
direct labor cost per unit is AED. 50.
Activity-Based Costing System 25
26. 1. The first stage allocation of costs to the activity cost
pools appears as below:
Activity Cost Pools
Description of cost Assemblin Processing Supporting
Other Total
components g Units Orders Customers
AED. AED. AED. AED. AED.
Manufacturing Overheads
250,000 175,000 25,000 50,000 500,000
cost
Selling & admin. Overheads 30,000 135,000 75,000 60,000 300,000
cost
--------------- ---------------- --------------- ------------ ----------
Total cost 280,000 310,000 100,000 110,000 800,000
======= ======= ======= ====== ======
Activity-Based Costing System 26
27. 2. The activity rates for the activity cost pools are:
Activity Cost Pools Total Cost Total Activity Activity Rate
AED. Units AED.
Assembling units 280,000 1,000 280 per unit
Processing orders 310,000 250 1,240 per order
Supporting
100,000 100 customers 1,000 per customer … (c)
customers
3. The overheads cost for the four orders of a total of 80
units of ASD would be computed as follows:
Activity Cost Pools Total Cost Total Activity Activity Rate
AED. AED.
Assembling units 280 per unit 80 units 22,400 …. (a)
Processing orders 1,240 per order 4 units 4,960 …. (b)
Supporting customers 1000 per customer Not applicable
Activity-Based Costing System 27
28. 4. The product and customer margin can be computed as
follows:
AD Product Margin: AED. AED.
Sales (AED. 595 per unit 80 units) 47,600
Cost:
Direct materials cost (AED. 180 per unit 80
14,400
units)
Direct labor cost (AED. 50 per unit 80 units) 4,000
Volume related overhead (a) 22,400
Order related overhead (b) 4,960 45,760
-------------------
AD Product Margin for the order 1,840
==========
Customer Profitability Analysis – XYZ Co.
Product margin 1,840
Less: Customer support overhead (above) 1,000
---------------
Profit 840
========
Activity-Based Costing System 28
29. 1. ABC system provides accurate costing of products/services.
2. Management has better understanding overheads cost.
3. The system utilizes unit cost rather than total cost unlike
absorption costing system.
4. ABC system integrates well with Six Sigma and other
continuous improvement programs.
5. The in-depth study of overheads cost under ABC system
makes all wastages visible to management and all non-
value added activities known to them. Thus, better controls
can be exercised on them.
6. It supports performance management and scorecards.
7. The system enables costing of processes, supply chains,
and value streams.
8. ABC system helps in benchmarking other products.
Activity-Based Costing System 29
30. 1. Implementing ABC system requires a big budget initially.
2. After implementation, the maintenance of the system is costly. Data
concerning numerous activity measures must be collected , checked, and
entered into the system on regular basis.
3. ABC system produces numbers such as product margins that are different
from the profits produced by traditional costing system. Management may
be double minded as they are used to work with traditional costing system,
as a requirement for external reporting.
4. ABC system generated data can be misinterpreted and must be used
with care when used in making decisions. Costs assigned to products,
customers and other cost objects are only potentially relevant.
5. Reports generated by ABC system do not conform to Generally
Accepted Accounting Principles (GAAP). Consequently, an organization
involved in ABC should have two cost systems - one for internal use and
one for preparing external reports.
Activity-Based Costing System 30
31. The initiative to implement ABC system must be strongly
supported by the management. The workings involve a
tremendous job of making inquiries from employees.
The design and implementation of ABC system should be
the responsibility of a cross functional team of technicians.
Normally, the team would include representatives from
accounting, finance, IT, marketing, production and
engineering departments.
Services of an ABC system consultant must be hired in order
to prevent the wastage of resources and time.
Selection of ABC software that could implement and
automate the processing of the system should be made upon
expert advice. We have given a list of ABC system softwares
as Appendix A.
Activity-Based Costing System 31
33. No. Software Website
http://www.acornsys.com
1 TDABC
2 SAS® Activity-Based Management ww.sas.com
http://www.cashfocus.com
3 ABC Focus activity based costing software
http://www.prismata.com
4 Prismata
http://www.mrdashboard.com
5 Activity Based Costing For EXCEL
Activity Based Costing – Workforce http://www.workforcesoftware.co
6 m
Software
http://africa.syspro.com
7 SYSPRO Activity Based Costing
http://www.business.com
8 Activity Based Costing/Management Software
http://www.algsoftware.com.au
9 ABC/M systems
http://www.acornsys.com
10 Acorn Systems
http://costperform.co.uk
11 CostPerform, UK
ACTIVITY BASED COSTING ANALYSIS http://www.xjtek.com
12 SIMULATION MODEL
http://www.enlighten-
13 Enlighten Software software.com
14 Prodacapo ABM Activity-Based Costing System http://www.prodacapo.com/abm 33
34. Cost & Management Accounting by Colin Drury, 5/e
Cost Accounting by Horngren /Datar /Foster, 11/e
Managerial Accounting by Hilton and Platt
Managerial Accounting by Weygandt / Kieso / Kimmel,
2/e
Cima Official Terminology
Activity-Based Costing System 34
35. A presentation by
Ahmad Tariq Bhatti
FCMA, FPA, MA (Economics), BSc
Dubai, United Arab Emirates
Contact
at.bhatty@gmail.com
Activity-Based Costing System 35