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Managerial Accounting: An Introduction To Concepts, Methods, And Uses. Chapter 3 Activity-Based Management. Maher, Stickney and Weil. Learning Objectives (Slide 1 of 2). Identify strategic and operational uses of activity-based management.

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Managerial accounting an introduction to concepts methods and uses

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

Chapter 3

Activity-Based Management

Maher, Stickney and Weil


Learning objectives slide 1 of 2
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.


Learning objectives slide 2 of 2
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.


Activity based costing management abcm slide 1 of 4
Activity-based Costing & Management (ABCM) (Slide 1 of 4)

  • ABCM rests on this premise:

    • Products require activities

    • Activities consume resources

  • To understand a product’s costs, one must?

    • Identify activities required to make the product


Activity based costing management abcm slide 2 of 4
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


  • Activity based costing management abcm slide 3 of 4
    Activity-based Costing & Management (ABCM) (Slide 3 of 4)

    • ABCM has 2 parts: What are they?


    Activity based costing management abcm
    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










    Cost rates per cost driver unit
    Cost Rates per Cost Driver Unit

    • Calculate predetermined cost rate for each cost driver as follows:


    Cost hierarchies

    Activity Category

    Capacity

    Customer

    Product

    Batch

    Unit

    Examples

    Plant Mgmt & Depr

    Mkt Research

    Product Specs & Testing

    Machine Setups

    Direct Materials

    Cost Hierarchies


    Resources used vs resources supplied
    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


    • 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

    • [email protected]

      Bloomsburg University of Pennsylvania


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