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Activity-Based Costing: A Tool To Aid Decision Making
Activity-Based Costing: A Tool To Aid Decision Making
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
7-2
ABC is designed to
provide managers with ABC is a
cost information for good supplement
to our traditional
strategic and other cost system
decisions that I agree!
potentially affect
capacity, and therefore,
affect “fixed”
as well as variable
costs.
7-3
Manufacturing Nonmanufacturing
costs costs
Traditional ABC
product costing product costing
Manufacturing Nonmanufacturing
costs costs
Some
All
Traditional ABC
product costing product costing
Activity–Based
Costing
Departmental
Overhead
Rates
Plantwide
Overhead
Rate
An allocation base
in an activity-based
costing system.
7-9
Transaction Duration
driver driver
ABC defines
five levels of activity
that largely do not relate
to the volume of units
produced.
Manufacturing
companies typically combine
their activities into five
classifications.
Product-Level Customer-Level
Activity Organization- Activity
sustaining
Activity
7-12
Strong top
management support Link to evaluations
and rewards
Cross-functional
involvement
7-13
ABC Limitations
Substantial resources Resistance to
required to implement unfamiliar numbers
and maintain. and reports.