ABC成本分析法(英文)课件

ABC成本分析法(英文)ABC成本分析法(英文)EvolutionofABCConventionalcostingsystemsuseatwo-stageallocationprocess: 1.servicedepartmentcostsare allocated toproductiondepartments. 2.productiondepartmentoverheadcosts areallocatedtoproductsusinga volume-basedpredetermined overheadrate.EvolutionofABCConventionalcProductcostsdon’tmakesenseProblem:TheremaybenorelationshipbetweentheoverheadapplicationbaseandthewaythatdifferentproductscauseoverheadcostsTheresult:High-volumesimpleproductsareover-costedandover-pricedLow-volumecomplexproductsareunder-costedandunder-pricedProductcostsdon’tmakesensePlantwideOverheadRatesCompanieshavetendedtousedirectlabour

astheoverheadapplicationbase.Howeverdirectlabourisnowarelativelyminorpartoftotalmanufacturingcost.Manytasksthatusedtobedonebyhandarenowdonebyautomatedequipment.PlantwideOverheadRatesCompanAtwostageprocessisnecessarybecausecosts

areallocatedtodepartments

andthentoproducts.FinishingDepartmentShippingDepartmentPaintingDepartmentDepartmentalOverheadRatesAtwostageprocessisFinishinDepartment1Department2Department3CostpoolsIndirectLaborIndirectMaterialsOtherOverheadStageOne:CostsassignedtopoolsDepartmentalOverheadRatesDepartmentDepartmentDepartmentDepartment1Department2Department3CostpoolsStageOne:Costsassignedtopools

ProductsStageTwo:CostsappliedtoproductsDepartmentalOverheadRatesIndirectLaborIndirectMaterialsOtherOverheadDepartmentDepartmentDepartmentDepartment1Department2Department3CostpoolsStageOne:Costsassignedtopools

ProductsStageTwo:CostsappliedtoproductsDirectLabourHoursMachineHoursRawMaterialsCostDepartmentalAllocationBasesDepartmentalOverheadRatesIndirectLaborIndirectMaterialsOtherOverheadDepartmentDepartmentDepartmentCostDistortionscausedby2-stageallocationsThereisanolinkbetweenthecauseofsupportactivitycostsandthebasisforassigningthesecoststoproductsWhy? 1.Allocationsarebasedonunitorvolume relatedmeasures. 2.Differentproductsconsumedifferent amountsofsupportactivities.CostDistortionscausedby2-sQuestionableprofitmarginsTocompeteinthemarketplace,somecompanieshavehadtocutthepricesofhighvolumepopularitems.But Theyhavebeenabletoachievehighmark-upsonlowvolumespecialtyproducts.QuestionableprofitmarginsToErosionofcompanyprofitsPricecutsproduceincreasedsalesinunitsbutdecreasedtotalrevenueHighmark-upsonspecialtyproductsdidn’toffsetthefallinprofitmarginsofhighvolumeproductsErosionofcompanyprofitsPricCausesofproblemsIncreasedproductdiversitychangingcoststructuresuseofvolume-basedcostdriversHaveresultedin:

distortedproductcostsCausesofproblemsIncreasedprSolution:ActivityBasedCostingABCusescostdriversthatdirectlylinkactivitiesperformedtoproductsmade.costdriversareselectedwhichmeasuretheaveragedemandplacedoneachactivitybyeachproduct.activitycostpoolsareassignedtoproductsinproportiontothewaythattheyconsumeeachactivity.Solution:ActivityBasedCostiSolution:ActivityBasedCostingACTIVITIESCONSUMERESOURCESPRODUCTSCONSUMEACTIVITIESActivitiesareusedtolink

resourcecoststoproductsSolution:ActivityBasedCostiActivityBasedCosting(ABC)Theobjectiveofactivity-basedcostingistounderstandthecausesofoverheadcostsandtoidentifytherealprofitabilityofproductsandcustomers.ABCisagoodsupplementtoourtraditionalcostsystemIagree!ActivityBasedCosting(ABC)ThOverheadratesmaybebasedonactivityatcapacity.ActivityBasedCosting(ABC)Activity-BasedCostingBothmanufacturingandnonmanufacturingcostsmaybeassignedtoproducts.Somemanufacturingcostsmaybeexcludedfromproductcosts.Thereareanumberofcostpools,eachof

whichisallocatedusingauniquemeasureofactivity.Allocationbasesoftendifferfromtraditionalcostingsystems.OverheadratesmayActivityBasHowCostsareTreatedUnderActivity-BasedCostingLevelofComplexityOverheadAllocation

PlantwideOverheadRateDepartmentalOverheadRatesActivityBasedCostingHowCostsareTreatedUnderAcActivity-basedcostingisawayofmeasuringboththecostofcostobjectsandtheperformanceofactivitiescanhelpsolveproblemssuchasdistortedproductcostspoorcostcontroltheformofABCadopteddependsontheproblemsthatneedtobeaddressedActivity-basedcostingisawayDesigninganABCSystemCostObjects(e.g.,productsandcustomers)ActivitiesConsumptionofResourcesCostDesigninganABCSystemCostObABC成本分析法(英文)课件IdentifyingandDefiningActivitiesAnACTIVITYisapartoftheproductionprocessforwhichmanagementwantsaseparatereportingofcosts.Unit-LevelActivitiesBatch-LevelActivitiesProduct-sustainingActivitiesFacility-sustainingActivitiesIdentifyingandDefiningActivOutputUnit-LevelCosts...areresourcessacrificedonactivitiesperformedoneachindividualunitofproductorservicee.g.EnergyusedbymachinesMachinedepreciationorrepairs TheKeyQuestion:Doestheamountoftheactivitycostpoolincreasewiththenumberofunitsproduced?OutputUnit-LevelCosts...areBatch-LevelCosts...areresourcessacrificedonactivitiesthatarerelatedtoabatchofunitsratherthantoeachindividualunitofproductorservice.Set-upactivitycostsmaybedrivenbyset-uphours.Thiswilldependonthenumberset-upscarriedouti.e.onthenumberofbatchesproducedandthetimeeachset-uptakes.Batch-LevelCosts...areresourProduct-Sustaining...(orservice-sustaining)costsareresourcessacrificedonactivitiesundertakentosupportindividualproductsorservices. Designcostsmaybedrivenbythetimespentbyengineersdesigningtheproductitselfandplanninghowitwillbemade.Product-Sustaining...(orserviFacility-SustainingCosts...areresourcessacrificedonactivitiesthatcannotbetracedtoindividualproductsorservicesbutwhichsupporttheorganizationasawhole.GeneraladministrationrentbuildingsecurityCEO’ssalaryFacility-SustainingCosts...arDifferentformsofABCSimpleapproach-includesmanufacturingoverheadonlyABCsystemforallindirectcosts-includesmanufacturingandnon-manufacturingcostsComprehensivesystem-includesallproduct-relatedcosts,exceptdirectmaterialDifferentformsofABCSimpleaTheMechanicsofABCClassicBrassLtdmakesfinelymachinedbrassfittingsforavarietyofapplications.Forthiscompany,theultimatecostobjectsare:Products,Customerorders,andCustomers.Oneoverheadcost-shipping-canbetraceddirectlytocustomerorders.Thecompany’sactivitycostpoolsareshownonthenextslide.TheMechanicsofABCClassicBrStep1:IdentifyandDefineActivitiesandActivityCostPoolsAtClassicBrass,theABCteam,selectedthefollowingactivitycostpoolsandactivitymeasures:Step1:IdentifyandDefineAcStep1:IdentifyandDefineActivitiesandActivityCostPoolsCustomerOrders-assignedallcostsofresourcesthatareconsumedbytakingandprocessingcustomerorders.ProductDesigns-assignedallcostsofresourcesconsumedbydesigningproducts.OrderSize-assignedallcostsofresourcesconsumedasaconsequenceofthenumberofunitsproduced.CustomerRelations–assignedallcostsassociatedwithmaintainingrelationswithcustomers.Other–assignedalloverheadcoststhatarenotassociatedwiththeothercostpools.Step1:IdentifyandDefineAcStep2:WheneverPossible,DirectlyTraceOverheadCoststoActivitiesandCostObjectsStep2:WheneverPossible,DirStep3:AssignCoststoActivityCostPoolsAtClassicBrassthefollowingdistributionofresourceconsumptionacrossactivitycostpoolsisdetermined.**Notincludedbecausetheyaredirectlytracedtocustomerorders.Step3:AssignCoststoActiviIndirectfactorywages$500,000Percentconsumedbycustomerorders25%$125,000Step3:AssignCoststoActivityCostPoolsIndirectfactorywagesFactoryequipmentdepreciation$300,000Percentconsumedbycustomerorders20%$60,000Step3:AssignCoststoActivityCostPoolsFactoryequipmentdepreciationStep3:AssignCoststoActivityCostPoolsStep3:AssignCoststoActiviStep4:CalculateActivityRatesDirectMaterialsDirectLaborShippingCostsOverheadCostsTracedTracedTracedCostObjects:Products,CustomerOrders,CustomersStep4:CalculateActivityRatStep4:CalculateActivityRatesDirectMaterialsDirectLaborShippingCostsOrderSizeCustomerOrdersProductDesignCustomerRelationsOtherOverheadCostsCostObjects:Products,CustomerOrders,CustomersFirst-StageAllocationStep4:CalculateActivityRatStep4:CalculateActivityRatesDirectMaterialsDirectLaborShippingCostsCostObjects:Products,CustomerOrders,CustomersOrderSizeCustomerOrdersProductDesignCustomerRelationsOtherOverheadCostsFirst-StageAllocationSecond-StageAllocations$/MH$/Order$/Design$/CustomerUnallocatedStep4:CalculateActivityRatStep4:CalculateActivityRatesTheABCteamestimatesthatClassicBrasswillhavethefollowingtotalactivitiesforeachactivitycostpool...1,000customerorders,200newdesigns,20,000machine-hours100customers.NowtheteamcancomputetheindividualactivityratesbydividingthetotalcostforeachactivitybythetotalactivitylevelsStep4:CalculateActivityRatStep4:CalculateActivityRatesAfterthefirst-stageallocationiscomplete,computationofactivityratesforeachactivitycostpoolcanbedoneasfollows:÷÷÷÷Step4:CalculateActivityRatStep5:AssignCoststoCostObjectsLet’stakealookathowoursystemworksforjustonecustomer–WindwardYachts.StandardStanchions(nodesignrequired)1.400unitsorderedwith2separateorders.2.Eachstanchionrequired0.5machine-hours.3.Sellingpriceis$34each.4.Directmaterialstotal$2,110.5.Directlabortotals$1,850.6.Shippingcoststotal$180.CustomCompassHousing(requiresnewdesign)1.Oneorderduringtheyear.2.Eachhousingrequired4machine-hours.3.Sellingpriceis$650each.4.Directmaterialstotal$13.5.Directlabortotals$50.6.Shippingcoststotal$25.Step5:AssignCoststoCostOStep5:AssignCoststoCostObjectsThecustomer-levelcostisassignedtocustomersdirectly;itisnotassignedtoproducts.Step5:AssignCoststoCostOStep6:PrepareManagementReportsStep6:PrepareManagementRepStep6:PrepareManagementReportsStep6:PrepareManagementRepStep6:PrepareManagementReportsCustomerProfitabilityAnalysisStep6:PrepareManagementRepProductMarginsTraditional

CostAccountingSystem(MH=machinehour)Predeterminedmanufacturingoverheadrate$1,000,00020,000MH=$50/MH=400unitsx0.5MH/unitx$50/MH=$10,000ProductMarginsTraditionalCosDifferencesBetweenABCandTraditionalProductCostingABCwillordinarilyshiftoverheadcostsfromhigh-volumeproductsproducedinlargebatchestolow-volumeproductsproducedinsmallbatches.UnderABCbothmanufacturingandnonmanufacturingcostsmaybeassignedtoproducts.Organization-sustainingcostsandthecostsofidlecapacityarenotassignedtoproducts.DifferencesBetweenABCandTrActivity-basedversusconventionalproductcostsConventionalcostingassumesproductcostsaredrivenbyvolume-basedcostdriversConventionalcostingignoresbatchsize-unitsproducedinlargebatchesconsumearelativelylowamountperunitofbatchcostsABCcanincludenon-manufacturingcostsActivity-basedversusconventiABCbenefitswillbegreatestwhere...Overheadcostsareasignificantproportionoftotalcost,andalargepartofoverheadisnotdirectlyrelatedtoproductionvolumeThebusinesshasadiverseproductrange,andtheindividualproducts’useofsupportresourcesdiffersfromtheiruseofvolume-basedcostdriversABCbenefitswillbegreatestABCbenefitswillbegreatestwhere...Productionactivityinvolvesdiversebatchsizesandproductcomplexity.Therearelikelytobehigh‘costs’associatedwithmakinginappropriatedecisions,basedoninaccurateproductcosts.Thecostofdesigning,implementingandmaintaininganABCsystemisrelativelylowduetosophisticatedITsupportABCbenefitswillbegreatestImpedimentstointroducingABCLackofawarenessofABCUncertaintyaboutthepotentialbenefitsfromABCFirmsunderstandtheneedforchangebutareconcernedabouttheextensiveresourcerequirementstoimplementABCResistancetochangeamongmanagersandemployeesReadingbyBoothandGiacobbeImpedimentstointroducingABCOtheractivity-basedcostingissuesSourcesofvariationsintypesofABCincludewhetheractual(past)orbudgetedcostsareanalysedtheimplementationisaone-offprojectoranon-goingsystemcostobjects,otherthanproducts,areincludedOtheractivity-basedcostingiOtheractivity-basedcostingissuesImplicationsofexcesscapacityABCestimatesthecostofresourcesusedtoperformactivitiestoproduceandsellproducts,whichmaynotalwaysequalthecostofresourcessuppliedneedtoaccountforthecostsofunusedcapacitywhenbudgetedcostshavebeenusedtogenerateactivity-basedproductcostsOtheractivity-basedcostingiOtheractivity-basedcostingissuesBehaviouralissueschangecanbeperceivedasthreateningABCmayrequirechangesindatacollectedandcollectionandanalysisprocedures‘bottom-up’changemanagementmaygivesomedegreeofownershipofanychangescausedbyABCmanagementmustbeseenascommittedtothechangeprocessOtheractivity-basedcostingiLimitationsofactivity-basedcostingIfahighleveloffacility-levelcostsareallocatedtoproducts,thiscanleadtoanarbitraryelementofproductcostUnitisedbatch,productandfacility-levelcostscanleadtoproductcoststhatareoflimitedusefordecisionmakingThecostofupdatinganABCsystemcanbeveryhigh,butthisisneededtoavoidproducingoutdated,irrelevantinformationLimitationsofactivity-basedActivity-basedcostinginserviceorganisationsABCcanbedifficulttoimplementinservicefirms,becausehighlevelsoffacilitycostscauseproblemswithcostingservicesindividualactivitiesaredifficulttoidentifybecausetheyarenon-repetitiveanon-repetitiveproductionenvironmentmakesitdifficulttoidentifyserviceoutputsActivity-basedcostinginservActivity-basedmanagement(ABM)Processofusinginformationfromactivity-basedcostingtoanalyseactivities,costdriversandperformancesothatcustomervalueandprofitabilityareimprovedCustomervaluethefeaturesofaproductwhichcustomersarewillingtopayActivity-basedmanagement(ABMUsingABMtoreducecostsIdentifythemajoropportunitiesforcostreductionDeterminetherealcausesofthesecostsDevelopaprogramtoeliminatethecauses,and,therefore,thecostsIntroduceperformancemeasurestomonitortheeffectivenessofcostreductioneffortsUsingABMtoreducecostsIdentIdentifyingthemajoropportunitiesforcostreductionValue-addedactivitiesessentialtothecustomer,orbusinessNon-value-addedactivitiescanbeeliminatedwithoutdetrimenttoeitherthecustomersorthebusinessIdentifyingthemajoropportunValue-AddedCostsAvalue-addedcostisacostthatcustomersperceiveasaddingvalue,orutility,toaproductorservicee.g.foracomputer:AdequatememoryPre-loadedsoftwareReliabilityEasy-to-usekeyboardsValue-AddedCostsAvalue-addedNon-value-addedcostsAnon-value-addedcostisacostthatcustomersdonotperceiveasaddingvalue,orutility,toaproductorservice.CostofexpeditingReworkRepairMaterialinspectionIdletimeNon-value-addedcostsAnon-valActivity-BasedManagementABMcanbeusedforProductpricingandmixdecisionsCostreductionandprocessimprovementdecisionsDesigndecisionsActivity-BasedManagementABMProductPricingandMixDecisionsABCgivesmanagementinsightintothecoststructuresformakingandsellingadiverserangeofproducts.Itprovidesmoreaccurateproductcostinformationandmoredetailedinformationoncostsofactivitiesandthedriversofthosecosts.ProductPricingandMixDecisiCostReductionandProcessImprovementDecisionsManufacturinganddistributionpersonneluseABCsystemstofocusoncostreductionefforts.Managerssetcost-reductiontargetsintermsofreducingthecostperunitofthecost-allocationbase.CostReductionandProcessImpDesignDecisionsManagementcanidentifyandevaluatenewdesignstoimproveperformancebyevaluatinghowproductandprocessdesignsaffectactivitiesandcosts.Companiescanworkwiththeircustomerstoevaluatethecostsandpricesofalternativedesignchoices.DesignDecisionsManagementcanJust-In-TimeProductionSystemsJust-in-time(JIT)productionsystems

takea“demandpull”approachinwhichgoodsareonlymanufacturedwhenneededtosatisfycustomerorders.Demandtriggerseachstepoftheproductionprocess,startingwithcustomerdemandforafinishedproductattheendoftheprocess,tothedemandfordirectmaterialsatthebeginningoftheprocess.Just-In-TimeProductionSystemMajorFeaturesofaJITSystemThefivemajorfeaturesofaJITsystemare:OrganizingproductioninmanufacturingcellsHiringandretainingmulti-skilledworkersEmphasizingtotalqualitymanagementReducingmanufacturingleadtimeandsetuptimeBuildingstrongsupplierrelationshipsMajorFeaturesofaJITSystemKeyfeaturesofJITproduction1.A‘pull’methodofco-ordinatingproductionwhichuseskanbans. ‘Kanban’istheJapanesetermforcardorvisiblerecord.Nothingismanufacturedatanystageuntilitsneedissignalledfromthesubsequentstage,viaakanban.

2.Simplifiedproductionprocesses.

Non-value-addedactivitiesareidentifiedandremoved.KeyfeaturesofJITproductionKeyfeaturesofJITproduction3.Purchaseofmaterials,andmanufactureofsub-assembliesandproductsinsmalllots

Batchsizestendtobesmallandinventorylevelsarelow.4.Quickandinexpensivesetupsofproductionmachinery.

Toproduceinsmallbatchessetuptimesmustbereduced.KeyfeaturesofJITproductionKeyfeaturesofJITproduction5.High-qualitylevelsforrawmaterials,componentsandfinishedproducts6.Effectivepreventativemaintenanceofequipment7.Flexibleworkteams

Manyfirmshavemovedfromrigidassemblylinestowardswork-basedteammadeupofmulti-skilledemployees.KeyfeaturesofJITproductionCostsofJITSubstantialinvestmentisneededtochangetheproductionfacilitiessoastominimisenon-value-addedactivitiesAnincreaseintheriskofinventoryshortagesandtheassociatedlossofproductionandsales.Astrikeatthefactoryofasuppliercancauseatotalshutdownofproduction.In2001a14daystrikebyemployeesata supplierofsteeringpartscostHoldenan estimated$20Maday.

CostsofJITSubstantialinvestBenefitsofJITSavingsininventory-carryingcostsLowerinsurancecostsFewerlossesduetospoilage,obsolescenceandtheftNoopportunitycostsofhighinventoryEliminationofnon-value-addedactivitiesMeetscustomersneedsmoreeffectivelyBenefitsofJITSavingsininveABC成本分析法(英文)课件ABC成本分析法(英文)ABC成本分析法(英文)EvolutionofABCConventionalcostingsystemsuseatwo-stageallocationprocess: 1.servicedepartmentcostsare allocated toproductiondepartments. 2.productiondepartmentoverheadcosts areallocatedtoproductsusinga volume-basedpredetermined overheadrate.EvolutionofABCConventionalcProductcostsdon’tmakesenseProblem:TheremaybenorelationshipbetweentheoverheadapplicationbaseandthewaythatdifferentproductscauseoverheadcostsTheresult:High-volumesimpleproductsareover-costedandover-pricedLow-volumecomplexproductsareunder-costedandunder-pricedProductcostsdon’tmakesensePlantwideOverheadRatesCompanieshavetendedtousedirectlabour

astheoverheadapplicationbase.Howeverdirectlabourisnowarelativelyminorpartoftotalmanufacturingcost.Manytasksthatusedtobedonebyhandarenowdonebyautomatedequipment.PlantwideOverheadRatesCompanAtwostageprocessisnecessarybecausecosts

areallocatedtodepartments

andthentoproducts.FinishingDepartmentShippingDepartmentPaintingDepartmentDepartmentalOverheadRatesAtwostageprocessisFinishinDepartment1Department2Department3CostpoolsIndirectLaborIndirectMaterialsOtherOverheadStageOne:CostsassignedtopoolsDepartmentalOverheadRatesDepartmentDepartmentDepartmentDepartment1Department2Department3CostpoolsStageOne:Costsassignedtopools

ProductsStageTwo:CostsappliedtoproductsDepartmentalOverheadRatesIndirectLaborIndirectMaterialsOtherOverheadDepartmentDepartmentDepartmentDepartment1Department2Department3CostpoolsStageOne:Costsassignedtopools

ProductsStageTwo:CostsappliedtoproductsDirectLabourHoursMachineHoursRawMaterialsCostDepartmentalAllocationBasesDepartmentalOverheadRatesIndirectLaborIndirectMaterialsOtherOverheadDepartmentDepartmentDepartmentCostDistortionscausedby2-stageallocationsThereisanolinkbetweenthecauseofsupportactivitycostsandthebasisforassigningthesecoststoproductsWhy? 1.Allocationsarebasedonunitorvolume relatedmeasures. 2.Differentproductsconsumedifferent amountsofsupportactivities.CostDistortionscausedby2-sQuestionableprofitmarginsTocompeteinthemarketplace,somecompanieshavehadtocutthepricesofhighvolumepopularitems.But Theyhavebeenabletoachievehighmark-upsonlowvolumespecialtyproducts.QuestionableprofitmarginsToErosionofcompanyprofitsPricecutsproduceincreasedsalesinunitsbutdecreasedtotalrevenueHighmark-upsonspecialtyproductsdidn’toffsetthefallinprofitmarginsofhighvolumeproductsErosionofcompanyprofitsPricCausesofproblemsIncreasedproductdiversitychangingcoststructuresuseofvolume-basedcostdriversHaveresultedin:

distortedproductcostsCausesofproblemsIncreasedprSolution:ActivityBasedCostingABCusescostdriversthatdirectlylinkactivitiesperformedtoproductsmade.costdriversareselectedwhichmeasuretheaveragedemandplacedoneachactivitybyeachproduct.activitycostpoolsareassignedtoproductsinproportiontothewaythattheyconsumeeachactivity.Solution:ActivityBasedCostiSolution:ActivityBasedCostingACTIVITIESCONSUMERESOURCESPRODUCTSCONSUMEACTIVITIESActivitiesareusedtolink

resourcecoststoproductsSolution:ActivityBasedCostiActivityBasedCosting(ABC)Theobjectiveofactivity-basedcostingistounderstandthecausesofoverheadcostsandtoidentifytherealprofitabilityofproductsandcustomers.ABCisagoodsupplementtoourtraditionalcostsystemIagree!ActivityBasedCosting(ABC)ThOverheadratesmaybebasedonactivityatcapacity.ActivityBasedCosting(ABC)Activity-BasedCostingBothmanufacturingandnonmanufacturingcostsmaybeassignedtoproducts.Somemanufacturingcostsmaybeexcludedfromproductcosts.Thereareanumberofcostpools,eachof

whichisallocatedusingauniquemeasureofactivity.Allocationbasesoftendifferfromtraditionalcostingsystems.OverheadratesmayActivityBasHowCostsareTreatedUnderActivity-BasedCostingLevelofComplexityOverheadAllocation

PlantwideOverheadRateDepartmentalOverheadRatesActivityBasedCostingHowCostsareTreatedUnderAcActivity-basedcostingisawayofmeasuringboththecostofcostobjectsandtheperformanceofactivitiescanhelpsolveproblemssuchasdistortedproductcostspoorcostcontroltheformofABCadopteddependsontheproblemsthatneedtobeaddressedActivity-basedcostingisawayDesigninganABCSystemCostObjects(e.g.,productsandcustomers)ActivitiesConsumptionofResourcesCostDesigninganABCSystemCostObABC成本分析法(英文)课件IdentifyingandDefiningActivitiesAnACTIVITYisapartoftheproductionprocessforwhichmanagementwantsaseparatereportingofcosts.Unit-LevelActivitiesBatch-LevelActivitiesProduct-sustainingActivitiesFacility-sustainingActivitiesIdentifyingandDefiningActivOutputUnit-LevelCosts...areresourcessacrificedonactivitiesperformedoneachindividualunitofproductorservicee.g.EnergyusedbymachinesMachinedepreciationorrepairs TheKeyQuestion:Doestheamountoftheactivitycostpoolincreasewiththenumberofunitsproduced?OutputUnit-LevelCosts...areBatch-LevelCosts...areresourcessacrificedonactivitiesthatarerelatedtoabatchofunitsratherthantoeachindividualunitofproductorservice.Set-upactivitycostsmaybedrivenbyset-uphours.Thiswilldependonthenumberset-upscarriedouti.e.onthenumberofbatchesproducedandthetimeeachset-uptakes.Batch-LevelCosts...areresourProduct-Sustaining...(orservice-sustaining)costsareresourcessacrificedonactivitiesundertakentosupportindividualproductsorservices. Designcostsmaybedrivenbythetimespentbyengineersdesigningtheproductitselfandplanninghowitwillbemade.Product-Sustaining...(orserviFacility-SustainingCosts...areresourcessacrificedonactivitiesthatcannotbetracedtoindividualproductsorservicesbutwhichsupporttheorganizationasawhole.GeneraladministrationrentbuildingsecurityCEO’ssalaryFacility-SustainingCosts...arDifferentformsofABCSimpleapproach-includesmanufacturingoverheadonlyABCsystemforallindirectcosts-includesmanufacturingandnon-manufacturingcostsComprehensivesystem-includesallproduct-relatedcosts,exceptdirectmaterialDifferentformsofABCSimpleaTheMechanicsofABCClassicBrassLtdmakesfinelymachinedbrassfittingsforavarietyofapplications.Forthiscompany,theultimatecostobjectsare:Products,Customerorders,andCustomers.Oneoverheadcost-shipping-canbetraceddirectlytocustomerorders.Thecompany’sactivitycostpoolsareshownonthen