1. Use only with permission of Susan Crosson Chapter 5 Activity-Based Systems Fall 2007 Crosson

2. Use only with permission of Susan Crosson Learning Objectives: Comparing Cost-based and Activity-based Systems: Cost versus Value Backflushing: Activity-based Cost Flows and Inventory Accounts JIT: Just-in-Time Concepts Activity-based Management: Supply chain and Value chain ABC: Cost Hierarchy and Bill of Activities

3. Use only with permission of Susan Crosson Comparing Cost-based and Activity-based Systems Cost World How much does it cost? Value World Value World How much value does it add?

4. Use only with permission of Susan Crosson BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH COGM EB BB +COGM COGS EB Material Inventory Work in Process Inventory A Recap of Job Cost Cards Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Job Costing Cost World RECAP:

5. Use only with permission of Susan Crosson BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH Costs Transferred OUT to the Next Department EB BB +COGM COGS EB Material Inventory Work in Process-Mixing Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Process Costing Cost World RECAP: BB +Transferred IN +DM +DL +OH COGM EB Work in Process-Baking & Packaging

6. Use only with permission of Susan Crosson Inventory Accounts in the Value World Cost of Goods Sold Beginning Balance +DM purchased & used +DL used +OH used End of period, count and backflush…. Work in Process Ending Balance AND Finished Goods Ending Balance Actual Cost of Goods Sold

7. Use only with permission of Susan Crosson What Do You Know? SE9 E12 E13 P8

8. Use only with permission of Susan Crosson JIT: Just-in-Time Concepts Simple is better Quality in everything we do – Products and services – Preventive maintenance Continuous improvement Inventory wastes resources – Purchase only as needed and many deliveries Eliminate non-value adding activities Produce only as needed – Demand pull v. demand push – Quick setups Multiskilled flexible workforce & workspace

9. Use only with permission of Susan Crosson What Do You Know? E10 E15

10. Use only with permission of Susan Crosson Just-In-Time JIT Types of Time – Process – Inspect – Move – Queue – Store

11. Use only with permission of Susan Crosson ABM: Activity-Based Management Supply chain/network Look and listen to SE3. Value chain

12. Use only with permission of Susan Crosson ABC: Cost Hierarchy Cost Hierarchy of Activities Unit Batch Product Facility Activity Cost Rates: SE5, SE6, E6, P6

13. ABC: Bill of Activities Review Problem E7 C4 C8

14. Homework P5Backflushing