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The Blue Ridge Revisited Case and OROS Quick ® ABC Software. Common Facility Costs. Fully Costed Products (Absorption costing!). Stage 2: A “Peanut Butter Spread”. Service Departments Stage 1: Direct Costs. Production Departments Stage 1: Direct Costs. Products. Stage 3:
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Common Facility Costs Fully Costed Products (Absorption costing!) Stage 2: A “Peanut Butter Spread” Service Departments Stage 1: Direct Costs Production Departments Stage 1: Direct Costs Products Stage 3: Direct Method Step-Down Method Reciprocal Method Stage 4: Process Costing Job-Order Costing Four Stages of Traditional Cost Allocation 1. Associate direct costs to all departments 2. Allocate common facility costs to all departments 3. Allocate Service Department cost “piles” to Production Departments 4. Allocate Production Department cost “piles” to Products
Common Facility Costs Fully-Costed Objects (but not GAAP) Don’t Allocate! Resources (The costs in all departments) Stage 1: Activities (Formed into cost pools after Stage 2) Cost Objects Stage 2: Resource Cost Drivers Stage 3: Activity Cost Drivers Three Stages of Activity-Based Costing • Identify all core activities to the organization • Assign costs to activities to form activity cost pools (by using resource consumption drivers) • Assign activity cost pools to cost objects (by using activity consumption drivers) • [Don’t allocate common facility costs!]
