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Untitled Prezi

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Joao Patricio

on 1 November 2012

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Purchasing Dep.

Cost pools Receiving Dep.

Materials handling Operational Strategic

“Doing things right” “Doing the good things” Activity-based management Activity-based costing Significant amounts of overhead.

Diversity of Activities

Costumer with demand variances Companies that would benefit from ABC/ABM Inaccurate

Outdated model for contemporary firms An allocation of manufacturing overhead costs to the products manufactured, treating as a single pool of an indirect cost
and a system that utilizes a single, volume-based cost driver. What is traditional method Improves control of overheads by a cost/cause relationship

Greater understanding of overhead costs

Eliminate allocating irrelevant costs to a product. A costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption. Why choose ABC method? Negative aspects of ABC Complex


Time consuming

Requires specific skills Negative aspects of ABC Impossibility to divide some overhead costs salary on a “per-product usage” basis.

Paying too much attention on details Negative aspects of ABC Need of two costing systems – one for internal and one for external use Doesn’t conform GAAP (General accepted accounting principals) Negative aspects of ABC

Can lead to losing sight on company’s strategic objectives Example: chief’s executive salary ABC costing method Costs allocated Traditional Costing Method Cost allocated Comparison – Costs to be allocated Forklift costs Two departments:

Receiving department

Shipping department Levi’s Strauss & Co Change the costing system? He invented the "blue jeans"in1873 Levis values and vision Empathy — walking in other people’s shoes

Originality — being authentic and innovative

Integrity — doing the right thing

Courage — standing up for what we believe.It takes courage to be great. To conclude... Thank you!
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