# 会计代写|中级管理会计代写Intermediate Management Accounting代考|ACCG3030

## 会计代写|中级管理会计代写Intermediate Management Accounting代考|The problem of overheads

In Chapter 4 we considered the traditional approach to job costing (that is, deriving the full cost of a unit of output where each unit of output differs from the others). We may recall that this approach involves collecting the direct costs for each job. These are the costs that can be clearly linked to, and measured in respect of, the particular job. The indirect costs (overheads), which cannot be linked to products in the same way, are allocated, or apportioned, to product cost centres and then charged to individual jobs using appropriate overhead recovery rates.

In the past, this approach has worked reasonably well, largely because overhead recovery rates (that is, rates at which overheads are absorbed by jobs) were typically much lower for each direct labour hour than the wage rate paid to direct workers. We have now, however, reached the position where overheads are often far more significant. It is not unusual for overhead recovery rates to be between five and ten times the hourly wage rate. Where production is dominated by direct labour that is paid, say, $£ 15$ an hour, it may be of no great consequence to assign overheads using an overhead recovery rate of, say, $£ 1$ an hour. It becomes much more so, however, where the overhead recovery rate is, say, $£ 75$ an hour. This can result in very arbitrary product costing. Even a small change in the amount of direct labour worked can have a huge effect on the total cost calculated for a job. This is not because direct labour is highly paid, but rather because of the effect of direct labour hours on the overhead cost loading. In modern manufacturing, direct labour often plays a small part in the production process and overhead costs have little connection to direct labour hours spent on each job. Thus, where a direct labour overhead rate is still being used, it will only add to the arbitrary nature of product costing.

## 会计代写|中级管理会计代写Intermediate Management Accounting代考|Taking a closer look

The changes in the competitive environment discussed above have led to much closer attention being paid to the issue of overheads, what causes them and how they are charged to jobs. It is increasingly recognised that overheads do not just happen; something must be causing them. To illustrate this point, let us consider Example 5.1.

Activity-based costing $(\mathrm{ABC})$ aims to overcome the kind of problem just described by directly tracing the cost of all activities supporting the production process (that is, the overheads) and linking those costs to particular units of output (of products or services). This is done on the basis that the particular units of output that cause the overheads are linked to them, as we just saw with stores operating costs in Example 5.1. For a manufacturing business, these support activities may include materials ordering, running machines, inspection, processing customer orders and so on. The cost of these support activities goes to make up total overheads cost. The purpose of tracing activity costs in this way is to provide a more realistic, and more finely measured, account of the overhead cost element for a particular unit of output.

To implement a system of ABC, managers must begin by carefully examining the business’s operations. They will need to identify:

• each of the various support activities involved in the process of making products or providing services;
• the costs to be assigned to each support activity; and
the factors that cause a change in the costs of each support activity, that is, the cost drivers.
Identifying the cost drivers is a vital element of a successful ABC system. (It is also, however, the most difficult aspect of $\mathrm{ABC}$.) The cost drivers have a cause-and-effect relationship with activity costs and so are used as a basis for assigning support activity costs to a particular unit of output. This point is now considered in further detail.

Once the various support activities have been identified, along with their costs and the factors that drive these costs, $\mathrm{ABC}$ requires three steps:
1 Establishing an overhead cost pool for each support activity. There will be just one cost pool for each separate cost driver. The cost pools are broadly equivalent to cost centres in the traditional approach as will be discussed shortly.
2 Assigning the total cost associated with each support activity to the relevant cost pool.
3 Charging the units of output with the total cost within each pool using the relevant cost driver.

Step 3, above, involves dividing the amount in each cost pool by the estimated total usage of the cost driver to derive a cost per unit of the cost driver. This unit cost figure is then multiplied by the number of units of the cost driver used by a particular unit of output, to determine the amount of overhead cost to be attached to it (or absorbed by it). Example $5.2$ should make this process clear.

# 管理会计代考

## 会计代写|中级管理会计代写中级管理会计代考|仔细看看

.

• 指在生产产品或提供服务的过程中所涉及的各种支持活动;
• 指分配给每个支持活动的成本;和
导致每个支持活动成本变化的因素，即成本驱动因素。确定成本驱动因素是一个成功的作业成本法系统的重要组成部分。(然而，这也是$\mathrm{ABC}$最困难的方面。)成本驱动因素与作业成本具有因果关系，因此被用作将支助作业成本分配给某一产出单位的基础。

2将与每个支持活动相关的总成本分配到相关的成本池中。
3使用相关的成本驱动程序将每个池的总成本与输出单位进行计费

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