BUS 202 Lecture 17: March 20th
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Department
BUS - Business Administration
Course
BUS 202
Professor
Nick Ross
Semester
Spring

Description
March 20th Monday, March 20, 2017 9:13 AM • Review: ○ How firms use information internally ○ In opposition(Bus 201): § Information for external users § SEC/GAAP ○ Historically companies have a lot of cost information ○ Goal: § Figure out the cost of complex things □ Types of absorption costing (SEC & GAPP approved) ® Job costing Process costing ® □ CVP & variable costing ® F,P,Q,V ○ Final type of costing: § Activity based costing (ABC) □ Interested in activities that drive overhead cost □ ABC Costing: ® Not absorption ® Not SEC or GAPP ® Direct costs don’t really change ® Focus on overhead □ #1 assig cost to cost pools based on activities □ #2 determine a cost driver for each cost pool □ #3 calculate cost for that driver § Frezi Bikes: 5 activities Total OH Cost driver Total driver CVP/F,P,Q,V Assembly $10,000 Dlh 24,000 10,000/24,000= 0.4167 Packaging $3,000 Units made 4,500 .67 □ Design $20,000 Change order 31,500 .63 Inventory $21,000 Units made` 4,500 4.67 management Buildings $246,100 Units made 4,500 54.69 □ What is the total cost of th 5 racing bike March 20th Monday, March 20, 2017 9:13 AM • Review: ○ How firms use information internally ○ In opposition(Bus 201): § Information for external users § SEC/GAAP ○ Historically companies have a lot of cost information ○ Goal: § Figure out the cost of complex things □ Types of absorption costing (SEC & GAPP approved) ® Job costing Process costing ® □ CVP & variable costing ® F,P,Q,V ○ Final type of costing: § Activity based costing (ABC) □ Interested in activities that drive overhead cost □ ABC Costing: ® Not absorption ® Not SEC or GAPP ® Direct costs don’t really change ® Focus on overhead □ #1 assig cost to cost pools based on activities □ #2 determine a cost driver for each cost pool □ #3 calculate cost for that driver § Frezi Bikes: 5 activities Total OH Cost driver Total driver CVP/F,P,Q,V Assembly $10,000 Dlh 24,000 10,000/24,000= 0.4167 Packaging $3,000 Units made 4,500 .67 □ Design $20,000 Change order 31,500 .63 Inventory $21,000 Units made` 4,500 4.67 management Buildings $246,100 Units made 4,500 54.69 □ What is the total cost of th 5 racing bike □ Packaging $3,000 Units made 4,500 .67 Design $20,000 Change order 31,500 .63 Inventory $21,000 Units made` 4,500 4.67 management Buildings $246,100 Units made 4,500 54.69 □ What is the total cost of th 5 racing bike T-5 racing bikes Total OH Cost Assembly 12,000 DLH .42*12,000=5,040.0 Packaging 1,500 bikes 1000 □ Design 22,500 change order 14,286 Inventory management 1,500 bikes 7,000 Buildings 1,500 bikes 82,033 Total 109,319 ® Per bike: 109,319/1500=72.8793 • Brass works: ○ Make parts for boats: ○ Activity cost pools: § Order § Design § Order size § Customer relations § Other Activity cost pools Rate Order $320/order Design $630/design ○ Order size $19Mh Customer relations $1,470/ customer Other N/A Organization sustaining activities ○ Standard stanchions ○ Department: § No new designs § 30k units § Each took 35 min of machine time 600 orders § § How much overhead cost?: Standard stancions □ Design $20,000 Change order 31,500 .63 Inventory $21,000 Units made` 4,500 4.67 management Buildings $246,100 Units made 4,500 54.69 □ What is the total cost of th 5 racing bike T-5 racing bikes Total OH Cost Assembly 12,000 DLH .42*12,000=5,040.0 Packaging 1,500 bikes 1000 □ Design 22,500 change order 14,286 Inventory management 1,500 bikes 7,000 Buildings 1,500 bikes 82,033 Total 109,319 ® Per bike: 109,319/1500=72.8793 • Brass works: Make parts for boats: ○ ○ Activity cost pools: §
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