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ABC
Cost
Accounting
ABC
cost accounting or activity based costing is the Cadillac of
cost accounting:
- Like the Cadillac, it's more expensive to buy
and operate, but is of higher quality.
Activity
costs consist of the following:
Activity Cost:
- Attempts to drive as many costs as possible to
the the part, based on actual costs or activity based studies.
- Direct labor will usually be actual cost.
The direct labor employees will enter time spent on each job
they work on.
- Downtime will also be actual time recorded by
the direct employees.
- Indirect Labor will record their time on each
job.
- For indirect labor that works on may jobs per
day, such as a fork truck driver, a study is done. In this
case the number of moves by the driver to arrive at a cost per part.
Material
Scrap:
- Recorded at the job to get an accurate history
of problems with the material and/or processes.
Burden
Costs:
- Machine burden is applied much the same as standard
cost.
- Whenever feasible, the actual costs will be
driven to the product
- As an example: we know the direct
labor hours and the indirect labor hours spent on the job, so the
employee benefits costs can be applied to the job based on hours worked.
The idea of ABC costing is to drive as many cost as possible to the
product, and estimate as few costs as possible.
In this way a more true cost emerges for the product and cost
increases or decreases to make the product are easy to see.
This is because most of the costs of the product are actual
costs.
Other
costing
methods:
Standard
Cost
Job
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