ACCA PM知识点:Activity-based costing

Ken Garrett demystifies activity-based costing and provides some tips leading up to the all-important examsConventional


Ken Garrett demystifies activity-based costing and provides some tips leading up to the all-important exams

Conventional costing distinguishes between variable and fixed costs.Typically,it is assumed that variable costs vary with the number of units of output(and that these costs are proportional to the output level)whereas fixed costs do not vary with output.This is often an over-simplification of how costs actually behave.For example,variable costs per unit often increase at high levels of production where overtime premiums might have to be paid or when material becomes scarce.Fixed costs are usually fixed only over certain ranges of activity,often stepping up as additional manufacturing resources are employed to allow high volumes to be produced.

Variable costs per unit can at least be measured,and the sum of the variable costs per unit is the marginal cost per unit.The marginal cost is the additional costs caused when one more unit is produced.However,there has always been a problem dealing with fixed production costs such as factory rent,heating,supervision and so on.Making a unit does not cause more fixed costs,yet production cannot take place without these costs being incurred.To say that the cost of producing a unit consists of marginal costs only will understate the true cost of production and this can lead to problems.For example,if the selling price is based on a mark‑up on cost,then the company needs to make sure that all production costs are covered by the selling price.Additionally,focusing exclusively on marginal costs may cause companies to overlook important savings that might result from better controlled fixed costs.

Absorption costing

The conventional approach to dealing with fixed overhead production costs is to assume that the various cost types can be lumped together and a single overhead absorption rate derived.The absorption rate is usually presented in terms of overhead cost per labour hour,or overhead cost per machine hour.This approach is likely to be an over-simplification,but it has the merit of being relatively quick and easy.


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In Table 1 in the spreadsheet above,we are given the budgeted marginal cost for two products.Labour is paid at$12 per hour and total fixed overheads are$224,000.Fixed overheads are absorbed on a labour hour basis.

based on Table 1 the budgeted labour hours must be 112,000 hours.This is derived from the budgeted outputs of 20,000 Ordinary units which each take five hours(100,000 hours)to produce,and 2,000 Deluxe units which each take six hours(12,000 hours).

Therefore,the fixed overhead absorption rate per labour hour is$224,000/112,000=$2/hour.

The costing of the two products can be continued by adding in fixed overhead costs to obtain the total absorption cost for each of the products.

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Table 1 has been amended to include the fixed overheads to be absorbed in both products.

Ordinary:(5 labour hours x$2 OAR)=$10

Deluxe:(6 labour hours x$2 OAR)=$12

This means we have arrived at the total production cost for both products under absorption costing.It also tell us that if production goes according to budget then total costs will be(20,000 x$85)+(2,000 x$102)=$1,904,000.

The conventional approach outlined above is satisfactory if the following conditions apply:

Fixed costs are relatively immaterial compared to material and labour costs.This is the case in manufacturing environments which do not rely on sophisticated and expensive facilities and machinery.

Most fixed costs accrue with time.点击免费下载>>>更多ACCA学习相关资料

There are long production runs of identical products with little customisation.

However,much modern manufacturing relies on highly automated,expensive manufacturing plants–so much so that some companies do not separately identify the cost of labour because there is so little used.Instead,factory labour is simply regarded as a fixed overhead and added in to the fixed costs of running the factory,its machinery,and the sophisticated information technology system which coordinates production.

Additionally,many companies rely on customisation of products to differentiate themselves and to enable higher margins to be made.Dell,for example,a PC manufacturer,has a website which lets customers specify their own PC in terms of memory size,capacity,processor speed etc.That information is then fed into their automated production system and the specified computer is built,more or less automatically.

Instead of offering customers the ability to specify products,many companies offer an extensive range of products,hoping that one member of the range will match the requirements of a particular market segment.In Example 1,the company offers two products:Ordinary and Deluxe.The company knows that demand for the Deluxe range will be low,but hopes that the price premium it can charge will still allow it to make a good profit,even on a low volume item.However,the Deluxe product could consume resources which are not properly reflected by the time it takes to make those units.

These developments in manufacturing and marketing mean that the conventional way of treating fixed overheads might not be good enough.Companies need to know the causes of overheads,and need to realise that many of their‘fixed costs’might not be fixed at all.They need to try to assign costs to products or services on the basis of the resources they consume.

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