1. Managerial Accounting: An Introduction To Concepts, Methods, And Uses Chapter 3 Activity-Based Management Maher, Stickney and Weil

2. Learning Objectives (Slide 1 of 2)  Identify strategic and operational uses of activity-based management.  Differentiate between traditional cost allocation methods and activity-based costing.  Understand the concept of activity- based costing.  Identify the steps in activity-based costing.

3. Learning Objectives (Slide 2 of 2)  Apply activity-based management and costing to marketing.  Use the cost hierarchy to organize cost information for decision-making.  Distinguish between resources used and resources supplied, and measure unused resource capacity.  Explain the difficulties of implementing advanced cost-management systems.

4. Activity-based Costing & Management (ABCM) (Slide 1 of 4)  ABCM rests on this premise:  Products require activities  Activities consume resources  To understand a product’s costs, one must?  Identify activities required to make the product

5. Activity-based Costing & Management (ABCM) (Slide 2 of 4)  Identify resources used to provide for those activities  Figure the cost of those resources  To be competitive, managers must know both:  Activities involved in making the goods or providing the services, and  The cost of those activities

6. Activity-based Costing & Management (ABCM) (Slide 3 of 4)  ABCM has 2 parts: What are they?

7. Activity-based Costing & Management (ABCM)  ABC treats mostly indirect costs including:  Overhead costs related to the manufacture of a product or providing a service  Indirect costs of marketing a product  Indirect costs of managing a company

8. Discuss Strategic Uses of ABCM

9. What are the 4 steps of activity analysis?

10. Define Cost Pools

11. Review the Value Chain

12. Discuss the Analysis of Activities Cycle

13. Discuss Traditional Allocation Methods

14. Discuss Activity-Based Costing

15. What are the required steps of activity-based costing?

16. Cost Rates per Cost Driver Unit  Calculate predetermined cost rate for each cost driver as follows:

17. Cost Hierarchies Activity Category  Capacity  Customer  Product  Batch  Unit Examples  Plant Mgmt & Depr  Mkt Research  Product Specs & Testing  Machine Setups  Direct Materials

18. Resources Used Vs. Resources Supplied  ABC estimates cost of resources used by an activity as: Cost driver rate X cost driver volume  Cost of Resources supplied = amount spent on the activity  Difference between resources used and supplied is unused capacity

19. If you have any comments or suggestions concerning this PowerPoint Presentation for Managerial Accounting, An Introduction To Concepts, Methods, And Uses, please contact: Dr. Michael Blue, CFE, CPA, CMA blue@bloomu.edu Bloomsburg University of Pennsylvania