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    MS03 03 Activity Based Costing Presentation

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    Clene Doconte
    The document discusses traditional costing versus activity-based costing (ABC). Traditional costing uses a single cost driver to allocate indirect costs, while ABC uses multiple cost drivers. ABC focuses on indirect costs, uses multiple cost pools, and provides more reliable information for decision-making. Activity-based management applies ABC and value chain analysis to improve pricing and eliminate non-value added activities. Value chain analysis examines the activities a firm performs to deliver a product to market. The document provides an example of applying ABC to analyze the costs of activities at different levels of a restaurant.

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    MS03 03 Activity Based Costing Presentation

    Uploaded by

    Clene Doconte
    15 views10 pages
    The document discusses traditional costing versus activity-based costing (ABC). Traditional costing uses a single cost driver to allocate indirect costs, while ABC uses multiple cost drivers. ABC focuses on indirect costs, uses multiple cost pools, and provides more reliable information for decision-making. Activity-based management applies ABC and value chain analysis to improve pricing and eliminate non-value added activities. Value chain analysis examines the activities a firm performs to deliver a product to market. The document provides an example of applying ABC to analyze the costs of activities at different levels of a restaurant.

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    The document discusses traditional costing versus activity-based costing (ABC). Traditional costing uses a single cost driver to allocate indirect costs, while ABC uses multiple cost drivers. ABC focuses on indirect costs, uses multiple cost pools, and provides more reliable information for decision-making. Activity-based management applies ABC and value chain analysis to improve pricing and eliminate non-value added activities. Value chain analysis examines the activities a firm performs to deliver a product to market. The document provides an example of applying ABC to analyze the costs of activities at different levels of a restaurant.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    15 views10 pages

    MS03 03 Activity Based Costing Presentation

    Uploaded by

    Clene Doconte
    The document discusses traditional costing versus activity-based costing (ABC). Traditional costing uses a single cost driver to allocate indirect costs, while ABC uses multiple cost drivers. ABC focuses on indirect costs, uses multiple cost pools, and provides more reliable information for decision-making. Activity-based management applies ABC and value chain analysis to improve pricing and eliminate non-value added activities. Value chain analysis examines the activities a firm performs to deliver a product to market. The document provides an example of applying ABC to analyze the costs of activities at different levels of a restaurant.

    Copyright:

    © All Rights Reserved
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    of 10

    ACTIVITY-BASED

    COSTING
    ICARE ACCOUNTANCY REVIEW
    Batch Leviticus
    JUNE
    2021
    TRADITIONAL COSTING

    Uses a single cost driver in allocating


    indirect costs to cost object

    Cost Cost
    Activity Cost
    Pool Object

    2
    ACTIVITY-BASED COSTING

    Uses multiple cost drivers in


    allocating indirect costs to cost object

    Activity Cost

    Cost Activity
    Pool Pool

    Cost
    Object 3
    TRADITIONAL VS. ACTIVITY-BASED COSTING

    Differences between traditional costing and ABC are as follows:

    Activity-Based Traditional
     Focal Application  Indirect Costs  Direct Costs
     Number of Cost Pools  Multiple  Single
     Cost driver  May vary based on activities  Commonly uses DLH or volume
     Manner of Allocation  Logical  Uniform
     Decision Making  More reliable  Less reliable
     Compliance with IFRS  Not acceptable  Acceptable

    4
    ACTIVITY-BASED MANAGEMENT
    Involves the application of activity-based costing and value-chain analysis in
    decision making

    BETTER PRICING
    Activity- DECISIONS
    based
    Costing

    Value-
    chain
    Analysis

    ELIMINATION OF NON- Activity-based


    VALUE ADDED ACTIVITIES
    Management

    5
    VALUE-CHAIN ANALYSIS
    Value chain – a set of activities that a firm operating in a specific industry performs in order to deliver
    a valuable product for the market. Example:

    Photo by: SMS Study

    6
    HIERARCHY OF ACTIVITY LEVELS

    Unit

    Batch

    Product

    Facility

    7
    PRITOW RESTAURANT

    Beef Tripe Eggs Bread Crumbs

    11 Secret Herbs & Fried Towel


    Flour Cooking Oil Spices

    8
    PRITOW RESTAURANT ABC ANALYSIS

    Activity Related Cost


     Unit-level activities  Cooking*  Cost of Gasoline
     Normal Packaging  Cost of Packaging

     Batch-level activities  Marinating  Cost flour, eggs, bread crumbs


     Procurement of raw ingredients  Supplies spent in the process

     Product-level activities  Advertisements  Cost of social-media advertising platform

     Customer-sustaining activities  Garnishments  Cost of sauce

     Facility-sustaining activities  Business Registration  Cost of Business Permits

    9
    THANK
    YOU!
    ICARE
    ACCOUNTANCY REVIEW
    Phone
    0927 283 8234
    Email
    icarecpareview@gmail.com

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