Lecture 4: ACTIVITY BASED COST SYSTEM

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

2 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

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

4 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

5 Two Stages of ABC IFAP- 2010

6 First Stage IFAP- 2010

7 Frame work ABPC IFAP- 2010

8 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

9 Second Stage IFAP- 2010

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

11 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

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

13 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

14 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

15 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

16 The End IFAP- 2010