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Chapter 3 COSTING BASED ON ABC ACTIVITIES - Coggle Diagram

- - - - The scope of work defines the responsibility of the interdisciplinary group or the third party responsible for its implementation. For this it is important to draw up a record where the cost objects are listed in detail.
- - - - ABC considers that the cost of a product or service is made up of direct materials or inputs plus the cost of the activities that are necessary to manufacture it, including all activities, both operational and administrative. This model focuses its attention on indirect resources, since the procedures used by traditional systems to distribute them are not very objective.
        
        ACCOUNTING DOES NOT SHOW ALL OF THE MEANS
        This is a phenomenon that occurs in accounting systems; It can be ensured that accounting does not express the reality of consumption in a given period; This does not mean that the accounting is poorly designed, but rather that it measures a different aspect than what the ABC intends.
        
        The administration can count on several reports: the costs of the products based on the totality of the resources, including the assets at replacement values; product costs based on all resources, including assets at values of realization; product costs based on all resources, including assets at historical values; the costs of the products with the countable resources; the costs of the products excluding activities; the costs of the products considering the consumption of resources «that should be».
- - - - To select the router, the following criteria must be taken into account
      - Causal relationship.
      - Router independence.
      - That the router is economical and easy to use.
      - Chance.
      - Consistency.
      - Control.
- - - - Manage accounts payable.
      - Manage accounts receivable.
        
        When the cost model is started in any institution, it is most likely that accurate data on the number of activities carried out in a given period does not exist. Faced with this event, two alternatives can be presented: omit the unit costs per lack of information (which is unfortunate for both costing and activity-based administration), or making more or less reliable estimates according to criteria established with the people in charge of the activities; the second will always be more recommendable.
        
        The most important thing is that from this moment on there is a committed action aimed at designing a system that captures the data that will feed the necessary statistics.
        
        There are several criteria used for different purposes, especially to calculate unit costs; the capacity criteria selected depends on whether senior management works from
        a short, medium or long-term point of view and how many forecasts they want to make for possible variations in volume. Below are the four capacity criteria traditionally used in cost theory to calculate quantities
        necessary in the determination of unit costs, namely:
        
        Criterion of maximum or theoretical capacity.
        
        Criterion of practical ability.
        
        Criterion of normal capacity.
        
        Criterion of expected real capacity.
      - Manage the investment portfolio.
      - Reconcile banks.
      - Prepare and coordinate the budget.
      - Generate reports.
      - Prepare financial statements.
- - - - Within the step-by-step methodology, the need for awareness has been sufficiently insisted; where the individual is immersed in the environment of rationality; It is valued as an essential element for the success of the cost model and it is set in the philosophy of Costing and Administration Based on ABM Activities; This is the beginning of a culture that is indispensable as a strategic management proposal.
        
        The philosophy of Activity Based Costing is simple, but the methodology can be a bit complicated when it comes to collecting the information; Interesting questions are likely to arise during staff development of questionnaires. Perhaps the most significant advantage of the manual procedure in the capture of information is the monitoring, which ensures that the responses of the officials are more objective and that all the data recorded are more reliable.
- - - - Implementation is simply the formal recognition of the cost model as a subsystem within the institution. Implementing the cost model means inserting into the organizational structure of the entity a new function that will be in charge of calculating and managing costs. This new office may very well be linked to the Planning division.
        
        Monitoring the model should ensure the following steps:
        
        Cost reports
        
        Assignment of responsibility for reports
        
        Performance evaluation
        
        Definition of goals
        
        Construction of statistics
        
        Tuning the model
        
        New prosecutions