Intended learning outcomes: Present in detail an ABC process plan and activity-based product cost estimation for a produced item as well as for a procured item.
Continuation from previous subsection (16.4.4)
The next two examples show the activity-based product cost estimation for a manufactured item and a purchased item, each based on an ABC process plan. Figure 16.4.4.4 relates to the main processes and subprocesses of a product manufactured in-house that were shown in Figure 16.4.3.1. The individual positions are very similar to those that would be found on a normal routing sheet. In this case, however, “Process ID” replaces the work center. The administrative process plan positions for order management and stock issues/receipts, for example, would also be shown in addition to the operations. To calculate the cost of goods manufactured, we would also normally include the operations found on the normal routing sheet. They would be used only to calculate the variable costs, however.
Fig. 16.4.4.4 An ABC process plan and activity-based product cost estimation for a produced item.
Figure 16.4.4.5 represents the ABC process plan and the activity-based product cost estimation for a purchased item. Main process and subprocesses correspond to those shown in Figure 16.4.3.2, using the example in Figure 16.4.4.3. Therefore, we should allocate $37 to fixed material costs for each built-in “power supply” component. The similarity to a routing sheet is obvious. Standard ERP software can be used to store the ABC process plan.
Fig. 16.4.4.5 An ABC process plan and activity-based product cost estimation for a procured item.
Course section 16.4: Subsections and their intended learning outcomes
16.4 Activity-Based Costing
Intended learning outcomes: Disclose the limits of traditional product costing. Explain activity-based costing: aim, basic premise, requirements, and technique. Present typical processes (activities) and process variables as well as the activity-based product cost estimation.
16.4.1 Limits of Traditional Product Costing
Intended learning outcomes: Describe allocating fixed costs to products with conventional cost accounting using two cost types. Explain the potential for error in traditional product costing.
16.4.2 Activity-Based Costing: Basic Premise, ABC Process, Activity Cost Driver, ABC Process Plan
Intended learning outcomes: Produce an overview on activity-based costing. Identify ABC process, process variable and process cost rate. Describe the ABC process plan and the process quantity.
16.4.2b Allocating Fixed Costs Using Activity-Based Costing, and Introducing ABC
Intended learning outcomes: Explain allocating fixed costs using activity-based cost accounting. Describe the steps to introduce activity-based costing into the company.
16.4.3 Typical Processes (Activities) and Process Variables for Activity-Based Costing
Intended learning outcomes: Explain determining main processes and subprocesses, using the example of circuit board assembly. Describe determining main processes and subprocesses using the example of procurement.
16.4.4 Activity-Based Product Cost Estimation
Intended learning outcomes: Produce an overview on Determining the process cost rate and process quantity for supplier management. Explain determining the process cost rate as well as the process costs for external procurement of a single item: “standard component” versus “exotic component”.
16.4.4b Activity-Based Costing: Examples
Intended learning outcomes: Present in detail an ABC process plan and activity-based product cost estimation for a produced item as well as for a procured item.
