管理会计英文讲义 管理会计Session Alternative costing principles.docVIP

管理会计英文讲义 管理会计Session 11 Alternative costing principles Session 11 Alternative costing principles 　　Main contents: 1. Activity based costing 　　2. Total quality management 　　3. Life cycle costing 　　4. Target costing 　　 　　11.1 Activity based costing 　　An alternative to the traditional methods of absorption costing is activity based costing （ABC）ABC involves the identification of the factors （cost drivers）which cause the costs of an organization’s major activities. Support overheads are charged to products on the basis of their usage of an activity. 　　Traditional costing system assumes all products consume resources in proportion to their production volumes, ABC attempts to overcome this problem. 　　The major ideas behind activity based costing are as follows: 　　（a）Activities cause costs. Activities include ordering, materials handling, machining, assembly, production scheduling and dispatching. 　　（b）Producing products creates demand for the activities. 　　（c）Costs are assigned to a product on the basis of the product’s consumption of the 　　Activities. 　　Calculating product costs using ABC 　　Step 1 – Identify an organization’s major activities. 　　Step 2 – Identify the factors which determine the size of the costs of an activity/cause the costs of an activity. These are known as cost driver. 　　Examples 　　Activity　　　　　　　　　 Cost driver 　　Ordering　　　　　　　　　 Number of orders 　　Materials handling　　　　 Number of production runs 　　Production scheduling　　　Number of production runs 　　Despatching　　　　　　　　Number of despatches 　　Step 3 – Collect the costs of each activity into what are known as cost pools （equivalent to cost centers under more traditional costing method.） 　　Step 4 – Charge support overheads to products on the basis of their usage of the activity. A product’s usage of an activity is measured by the number of the activity’s cost driver it generates. 　　Example: Suppose, for example, that the cost pool for the ordering activities totaled $100,000 and that there were 10,000 o