Ch4 Day 2 HW highlights (1)

School: University of Wisconsin, Oshkosh - Course: ACCT 304 - Subject: Accounting

Exercise 4.19 1. "Unbundling" means that general ledger costs are assigned to activities. Knowing the cost of activities is the first step in assigning costs to products (or other cost objects). Costs are first traced to activities and then toproducts.<--2 stage ABC 2. The general ledger system collects costs by accounts. It reports what is spent. An ABC database collects costs by activities and reveals how resources are spent. 3.Activity-Engineering DeptCost Creating BOMs$ 63,000a"primary" (given, for product) Studying capabilities61,500b"secondary" (given, mfg/non-mfg) Improving processes220,500c secondary (given) Training employees106,000dsecondary (given) Designing tools179,000e primary (given) a (0.20 × $300,000) + (0.10 × $30,000) b(0.20 × $300,000) + (0.05 × $30,000) c (0.40 × $100,000) + (0.60 × $100,000) + $50,000 + (0.20 × $300,000) + (0.35 × $30,000) d(0.40 × $100,000) + (0.20 × $300,000) + (0.20 × $30,000) e(0.60 × $100,000) + $50,000 + (0.20 × $300,000) + (0.30 × $30,000) The resource drivers are percent of machine usage, percent of effort, and percent of supply usage . 4.Multi-stage costing (more in Ch7) First, assign the cost of the activity, studying capabilities, to the other four activities. A possible driver is engineering time (assign costs in proportion to the engineering time spent on each of the four activities). A more detailed approach would be to identify the study time that is specifically related to each of the four activities and use that as the driver. Second, assign the costs of the primary activities to jobs. Creating BOMs can be assigned using number of BOMs (transaction) or time required to develop BOMs (duration). Designing tools can be assigned to jobs using number of tools developed (transaction) or development time (duration). Third, assign the cost of the other secondary activities to primary activities that consume them (i.e., to the manufacturing activities of cutting, drilling, etc.). Training employees can be assigned using number of training sessions (transaction) or hours of training (duration). Improving processes can be assigned using number of improvements (transaction) or hours of effort (duration). Once these costs are assigned to the primary activities, then the costs of the manufacturing activities are assigned to jobs based on hours of manufacturing activity.

Exercise 4.20 1. and 2.Activity id and classification, where "unit" = each shoe; ProcessActivitiesLevel Sustaining:Providing spaceFacility Procurement:Receiving goodsBatch Paying suppliers Batch Manufacturing:CuttingUnit SewingUnit AttachingUnit Inspect(c/be unit~GE)Batch Order-filling:Moving goodsBatch Sorting goodsBatch Shipping goodsBatch Design:ModifyingProduct DevelopingProduct Producing prototypeProduct Test marketingProduct Unit level (each shoe): intuition - if 2X #shoes produced, then 2X cuttinguse unit level driver Batch (groups of units): e.g. inspectsample from batch), procure (place JIT order w/supplier), deliver (fill customer order). Product (groups of groups): e.g. design shoe type (dressy, casual ...) Facility (all else): e.g. space for all shoe types