Managerial Accounting: An Introduction To Concepts, Methods, And Uses

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Managerial Accounting An Introduction To
Concepts, Methods, And Uses

• Chapter 3
• Activity-Based Management

Maher, Stickney and Weil
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Learning Objectives (Slide 1 of 2)

• Identify strategic and operational uses of
  activity-based management.
• Differentiate between traditional cost allocation
  methods and activity-based costing.
• Understand the concept of activity-based costing.
• Identify the steps in activity-based costing.

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Learning Objectives (Slide 2 of 2)

• Apply activity-based management and costing to
  marketing.
• Use the cost hierarchy to organize cost
  information for decision-making.
• Distinguish between resources used and resources
  supplied, and measure unused resource capacity.
• Explain the difficulties of implementing advanced
  cost-management systems.

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Activity-based Costing Management (ABCM) (Slide
1 of 4)

• ABCM rests on this premise
• Products require activities
• Activities consume resources
• To understand a products costs, one must?
• Identify activities required to make the product

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Activity-based Costing Management (ABCM) (Slide
2 of 4)

• Identify resources used to provide for those
  activities
• Figure the cost of those resources
• To be competitive, managers must know both
• Activities involved in making the goods or
  providing the services, and
• The cost of those activities

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Activity-based Costing Management (ABCM) (Slide
3 of 4)

• ABCM has 2 parts What are they?

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Activity-based Costing Management (ABCM)

• ABC treats mostly indirect costs including
• Overhead costs related to the manufacture of a
  product or providing a service
• Indirect costs of marketing a product
• Indirect costs of managing a company

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Discuss Strategic Uses of ABCM
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What are the 4 steps of activity analysis?
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Define Cost Pools
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Review the Value Chain
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Discuss the Analysis of Activities Cycle
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Discuss Traditional Allocation Methods
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Discuss Activity-Based Costing
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What are the required steps of activity-based
costing?
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Cost Rates per Cost Driver Unit

• Calculate predetermined cost rate for each cost
  driver as follows

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Cost Hierarchies

• Activity Category
• Capacity
• Customer
• Product
• Batch
• Unit

• Examples
• Plant Mgmt Depr
• Mkt Research
• Product Specs Testing
• Machine Setups
• Direct Materials

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Resources Used Vs. Resources Supplied

• ABC estimates cost of resources used by an
  activity as
• Cost driver rate X cost driver volume
• Cost of Resources supplied amount spent on the
  activity
• Difference between resources used and supplied is
  unused capacity

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• If you have any comments or suggestions
  concerning this PowerPoint Presentation for
  Managerial Accounting, An Introduction To
  Concepts, Methods, And Uses, please contact
• Dr. Michael Blue, CFE, CPA, CMA
• blue_at_bloomu.edu
• Bloomsburg University of Pennsylvania