Chapter 8 - Activity-based costing . The main contents of this chapter include all of the following: Problems with conventional product costing systems, activity-based costing, activity-based costing model, different forms of ABC activity-based versus conventional product costs when to use ABC impediments to using ABC other activity-based costing issues activity-based costing in service organisations. | Chapter 8 Activity-based costing 8- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Outline Problems with conventional product costing systems Activity-based costing Activity-based costing model Different forms of ABC Activity-based versus conventional product costs When to use ABC Impediments to using ABC Other activity-based costing issues Activity-based costing in service organisations 8- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Problems with conventional product costing systems Features of conventional product costing systems Direct material and direct labour costs are traced to products Manufacturing overhead costs are allocated to products using a predetermined overhead rate, sometimes plant wide Manufacturing overhead rate is calculated using some measure of production | Chapter 8 Activity-based costing 8- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Outline Problems with conventional product costing systems Activity-based costing Activity-based costing model Different forms of ABC Activity-based versus conventional product costs When to use ABC Impediments to using ABC Other activity-based costing issues Activity-based costing in service organisations 8- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Problems with conventional product costing systems Features of conventional product costing systems Direct material and direct labour costs are traced to products Manufacturing overhead costs are allocated to products using a predetermined overhead rate, sometimes plant wide Manufacturing overhead rate is calculated using some measure of production volume Non-manufacturing costs are not assigned to products 8- (cont.) Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Problems with conventional product costing systems (cont.) Failure to adapt to the changing business environment Increasing levels of non-volume-driven manufacturing overhead costs Increasing proportions of non-manufacturing costs Causes of changes in costs include increased automation, increasing product diversity, increased customer demand for improved service, quality and customer support 8- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith 8- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Indicators of problems with a product costing system Conventional .
