Professional Documents
Culture Documents
ACCOUNTING
PPT 14 -1
PPT 14 -2
Process Dimension
Driver Analysis
Why?
Resources
Activities
What?
Performance Measures
How Well?
Products and
Customers
PPT 14 -4
Activity Analysis
Activity analysis should produce four outcomes:
What activities are performed?
How many people perform the activities?
The time and resources required to perform the activities.
An assessment of the value of the activities to the organization,
including a recommendation to select and keep only those that
add value.
PPT 14 -6
Value-Added Activities
A discretionary activity is classified as value-added
provided it simultaneously satisfies three conditions:
The activity produces a change of state.
The change of state was not achievable by preceding
activities.
The activity enables other activities to be performed.
PPT 14 -7
Nonvalue-Added Activities
Nonvalue-Added Activities are activities that add cost and impede
performance.
Scheduling
Moving
Waiting
Examples
Inspecting
Storing
PPT 14 -8
Activity Analysis
Activity Analysis Can Reduce Costs in Four Ways:
Activity elimination
Activity selection
Activity reduction
Activity sharing
PPT 14 -9
PPT 14 -10
PPT 14 -11
Activity Driver
SQ
AQ
SP
Welding
Welding hours
10,000
8,000
$40
Rework
Rework hours
10,000
Setups
Setup hours
6,000
60
Inspection
# of inspections
4,000
15
PPT 14 -12
Activity
ValueAdded Costs
NonvalueAdded Costs
Actual Costs
Welding
$400,000
$ 80,000
$480,000
Rework
----
90,000
90,000
Setups
----
360,000
360,000
Inspection
----
60,000
60,000
$400,000
$590,000
$990,000
Total
PPT 14 -13
Activity
Nonvalue-Added Costs
2000
2001
Change
Welding
$ 80,000
$ 50,000
$ 30,000
Rework
360,000
200,000
160,000
Setups
90,000
70,000
20,000
Inspections
60,000
35,000
25,000
$590,000
$355,000
$235,000
Total
PPT 14 -14
PPT 14 -15
Share
Information
Organization B
Cost of Processing a
Purchase Order is
$15
How do we improve?
PPT 14 -16
Activity-Based Budgeting
Activity flexible
budgeting is the
prediction of what
activity costs will be as
activity output changes.
PPT 14 -17
Variable10,00020,000
Direct materials
---$10 $100,000$200,000
Direct labor
---8
Maintenance
80,000160,000
$ 20,0003
50,00080,000
Machining
15,0001
25,00035,000
Inspections
120,000---
120,000120,000
50,000---
50,00050,000
Setups
Purchasing
Total
=======
======= ==========
PPT 14 -18
Level of Activity
Variable10,00020,000
Direct materials
---$10 $100,000$200,000
Direct labor
---
Subtotal
==
80,000 160,000
$0$18 $180,000$360,000
===
Variable8,000 16,000
$20,000$5.50$64,000
$108,000
47,000
$35,000$7.50$95,000
====
$155,000
PPT 14 -19
Variable25
30
$80,000$2,100$132,500
--- 1,800
$143,000
45,000
$80,000$3,900$177,500
54,000
$197,000====== =====
Variable15,00025,000
$211,000$1 $226,000$236,000
=======
=======
==
$678,000$948,000
PPT 14 -20
Budgeted Costs
Budget Variance
$101,000
$100,000
Direct labor
80,000
80,000
---
Maintenance
55,000
64,000
9,000 F
Machining
29,000
31,000
2,000 F
Inspections
125,500
132,500
7,000 F
46,500
45,000
1,500 U
220,000
226,000
6,000 F
$657,000
=======
$678,500
=======
$21,500 F
======
Setups
Purchasing
Total
$1,000 U
PPT 14 -21
Actual Cost
Budgeted Cost
Variance
$ 82,000
$ 80,000
$2,000 U
43,500
52,500
9,000 F
$125,500
=======
$132,500
=======
$7,000 F
=====
Inspection:
Fixed
Variable
Total
PPT 14 -22