Scribd
Upload
512 views

Activity Based Costing Example

Activity based costing (ABC) is a means by which indirect costs are allocated to individual items based on the activity that drives those costs. Ordinarily, ABC does not conform with generally accepted accounting principles (GAAP).

Uploaded by

ImperoCo LLC
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
512 views

Activity Based Costing Example

Activity based costing (ABC) is a means by which indirect costs are allocated to individual items based on the activity that drives those costs. Ordinarily, ABC does not conform with generally accepted accounting principles (GAAP).

Uploaded by

ImperoCo LLC
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 3

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Activity Based Costing Example


Product Profitability Analysis

1
Item1

Item2

Item3

Item4

Item5

Sales units
Sales dollars

14,790
$ 2,298,366

12,853
$ 3,435,928

24,311
$ 3,822,905

12,395
$ 3,233,236

31,021
$ 3,156,387

Direct Costs
Direct materials
Direct labor
Total direct costs

(378,953)
(1,696,401)
(1,129,207)
(1,040,302)
(938,312)
(598,320)
(294,637)
(888,315)
(600,617)
(868,180)
$ (977,273) $ (1,991,038) $ (2,017,522) $ (1,640,919) $ (1,806,492)

Activities
Research & development
Procure materials
Manufacturing
Shipping
Marketing/customer service
Total allocated costs
Total item margin

(308,649)
(361,244)
(437,444)
(333,640)
(406,624)
(114,314)
(141,907)
(100,167)
(114,477)
(909,366)
(1,409,101)
$ 411,727 $
35,789 $

Share of unallocated costs


Total item operating profit

Sales

Per Unit Breakdown


Average sales price per unit
Direct and allocated cost per unit
Item margin per unit
Unallocated cost per unit
Operating profit per unit

$
$
$

(397,933)
(437,444)
(375,345)
(417,050)
(126,140)
(137,965)
(100,167)
(114,477)
(999,585)
(1,106,937)
805,798 $
485,380 $

(58,109)
353,618 $

(58,109)
(22,320) $

(58,109)
747,689 $

(58,109)
427,271 $

155.40 $
(127.56)
27.84 $
(3.93)
23.91 $

267.32 $
(264.54)
2.78 $
(4.52)
(1.74) $

157.25 $
(124.10)
33.15 $
(2.39)
30.76 $

260.85 $
(221.69)
39.16 $
(4.69)
34.47 $

(308,649)
(262,466)
(239,804)
(86,721)
(71,548)
(969,188)
380,707
(58,109)
322,598

101.75 Sales dollars / Sales units


(89.48) (Total direct costs + Total allocated costs) / Sales units
12.27
(1.87) Share of unallocated costs / Sales units
10.40

Operating Profit by Item

$300

$250

$200

$150

Sales Price
Full cost

$100

Operating profit

$50

$0

-$50
Item1

Item2

Notes
1 Costs are reflected as (negative) in this section to better contrast with sales.

Item3

Item4

Item5

WHITE CELLS ARE ADJUSTABLE


Kristoffer Burnett - Certified Management Accountant, 2009-2011

Activity Based Costing Example


Item and Sales Information
Item
Sales units
Sales dollars

Item1
Item2
Item3
Item4
Item5
14,790
12,853
24,311
12,395
31,021
$ 2,298,366 $ 3,435,928 $ 3,822,905 $ 3,233,236 $ 3,156,387

Direct Cost Information


Direct materials
Direct labor

Activity Metric Breakdown


Number of products designed
Number of POs
Number of manufacturing batches
Number of shipments
Number of customers

378,953
598,320

1,696,401
294,637

1,129,207
888,315

1,040,302
600,617

The activity metrics are specified on the Analysis worksheet


Item1
Item2
Item3
Item4
1
128
155
141
155
32
39
36
40
29
36
32
35
7
8
7
8

938,312
868,180

Item5

Total
$ 5,183,175
3,250,069

Total
1
93
23
22
5

Notes
1 For the purposes of this example, a value of "1" means that this item was developed during the relevant period.

2
672
170
154
35

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009 -2011

Activity Based Costing Example


Cost Outline
COGS Expenses
Direct materials
Direct labor
Indirect labor
Misc employee expenses
Supplies
Maintenance
Freight in
Depreciation
Utilities
Lease expense
Total COGS expenses
Operating Expenses
Salaries
Misc employee expense
Supplies
Maintenance
Shipping
Depreciation
Utilities
Lease expense
Total operating expenses

Amount
$ 5,183,175 Direct costs are broken out by item on the Data worksheet
3,250,069 "
499,999
100,000
157,142
271,428
642,856
499,999
328,571
357,142
$11,290,381
1
Amount
466,552
268,621
42,414
212,069
664,483
342,845
307,500
523,103
$ 2,827,587
$

Identify Activities
Activity
Research & development
Procure materials
Manufacturing
Shipping
Marketing/customer service

Metric
Number of products designed
Number of POs
Number of manufacturing batches
Number of shipments
Number of customers

Cost Breakdown by Activity


COGS Expenses
Direct materials
Direct labor
Indirect labor
Misc employee expenses
Supplies
Maintenance
Freight in
Depreciation
Utilities
Lease expense
Operating Expenses
Salaries
Misc employee expense
Supplies
Maintenance
Shipping
Depreciation
Utilities
Lease expense
Totals
Activity Metric
Number of products designed
Number of POs
Number of manufacturing batches
Number of shipments
Number of customers
Activity cost per measure

Research & development


$ 5,183,175
3,250,069
499,999
100,000
157,142
271,428
642,856
499,999
328,571
357,142

0%
0%
0%
0%
0%
0%
0%
0%

466,552
268,621
42,414
212,069
664,483
342,845
307,500
523,103

25%
20%
20%
25%
25%
20%
15%
20%

Procure materials

Manufacturing

Shipping

Marketing/customer service

Unallocated
Direct costs are already traceable to the individual items and do not need to be allocated
The sum of the percentages must = 100%

116,638
53,724
8,483
53,017
166,121
68,569
46,125
104,621
617,298

50%
30%
75%
30%
70%
55%
30%
40%

250,000
30,000
117,857
81,428
449,999
274,999
98,571
142,857

50%
35%
25%
70%
30%
45%
65%
55%

250,000
35,000
39,286
190,000
192,857
225,000
213,571
196,428

0%
0%
0%
0%
0%
0%
0%
0%

25%
15%
10%
15%
10%
15%
20%
15%

116,638
40,293
4,241
31,810
66,448
51,427
61,500
78,465
1,896,535

10%
20%
25%
15%
10%
25%
10%
20%

25%
10%
20%
20%
20%
30%
15%
25%

46,655
53,724
10,604
31,810
66,448
85,711
30,750
104,621
1,772,464

10,426

116,638
26,862
8,483
42,414
132,897
102,854
46,125
130,776
607,048

3,941.87

0%
0%
0%
0%
0%
0%
0%
0%

15%
25%
25%
25%
15%
10%
20%
20%
$

69,983
67,155
10,604
53,017
99,672
34,285
61,500
104,621
500,836

35
14,309.61

0%
35%
0%
0%
0%
0%
5%
5%

35,000
16,429
17,857

0%
10%
0%
0%
20%
0%
20%
0%
$

26,862
132,897
61,500
290,544

290,544 totals / Total of the Activity Metric on the Item Information worksheet

These totals are pulled from the Data worksheet


2
672
170
154
$

308,649

2,822

Notes
1 These figures should represent actual amounts spent. Therefore, they may not match what is shown on the income statement due to the use of accrual accounting.
2 For simplicities sake, only a handful of activities are initially recommended. This is to help assure that the costs associated with data collection
does not outweigh the benefits.

You might also like