Lecture 4: ACTIVITY BASED COST SYSTEM IFAP – UAJY Lecture 4: ACTIVITY BASED COST SYSTEM IFAP- 2010

ABC System A cost information system based on activities with the main purposes is motivating people doing long run cost reduction through managing the activities well. IFAP- 2010

Philosophy ABC System Cost is caused The causes of cost can be managed An activity IFAP- 2010

Examples of Activities Processing purchase orders. Handling materials and parts. Inspecting incoming material and parts. Setting up equipment. Producing goods using manufacturing equipment. Supervising assembly workers. Inspecting finished goods. Packing customer orders. IFAP- 2010 4

Two Stages of ABC IFAP- 2010

First Stage IFAP- 2010

Frame work ABPC IFAP- 2010

The strengths of ABC Informing  The ability of ABC system to provide information in monitoring individual performance Empowering  The ability of ABC system to provide information for empowering employee in doing cost reduction. IFAP- 2010

Second Stage IFAP- 2010

Benefits of ABPC Information Performance evaluation each activity Determine target cost reduction  continues improvement Budgeted cost calculation IFAP- 2010

EMPOWERING INFORMATION Value- and non-value-added activities Activity’s customer Cycle Effectiveness Activity type  Result producing, result contributing, supporting, hygiene and housekeeping Method of resource assignment to activity  Direct, driver tracing and allocation Resource driver Budget type  Fixed, Variable, Step variable IFAP- 2010

RESULT-PRODUCING ACTIVITIES Directly related with generating revenue from customer by selling product/services. Example: production activity, marketing, selling, and distribution IFAP- 2010

RESULT-CONTRIBUTING ACTIVITIES Giving assistance to result-producing activity in generating profit from customer. Examples: logistic activity, maintenance activity and after sales services activity. IFAP- 2010

SUPPORT ACTIVITIES aktivitas yang menyediakan jasa layanan kepada result-producing activity dan result-contributing activity. merupakan pusat layanan jasa (service center) terutama untuk melayani jasa yang dibutuhkan oleh result-producing activity dan result-contributing activity. aktivitas keuangan, aktivitas akuntansi, aktivitas kesekretariatan, aktivitas hukum, dan aktivitas manajemen sumber daya manusia, aktivitas pengawasan intern, dan aktivitas hubungan masyarakat. IFAP- 2010

HYGIENE AND HOUSEKEEPING ACTIVITIES aktivitas yang menyediakan jasa layanan kebersihan dan kerumahtanggaan kepada result-producing activity, result-contributing activity, dan support activity. aktivitas pembersihan kantor dan lingkungan, aktivitas pemeliharaan taman. IFAP- 2010

The End IFAP- 2010