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Customer Profitability Analysis (Activity Based Costing)
 
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This video shows how to perform profitability analysis using activity-based costing. Many companies serve a variety of customer types. By calculating the profitability of each type of customer, the company can determine which customer types are the most profitable and whether some customers are unprofitable. The profitability of a customer type is determined by charging direct (traceable) costs to the customer type and then allocating indirect costs to the customer type using activity-based costing. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like Edspira on Facebook, visit https://www.facebook.com/Edspira To sign up for the newsletter, visit http://Edspira.com/register-for-newsletter Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin To follow Michael on Facebook, visit https://www.facebook.com/Prof.Michael.McLaughlin
Views: 1377 Edspira
MAC3701 - SU2 - L13 - ABC Profitability Analysis
 
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Get more free videos to help you pass MAC3701? Visit https://goo.gl/aP8Ji5 for more info. HOW DOES TABALDI HELP YOU PASS MAC3701? Tabaldi helps students pass their MAC3701 exams with affordable, easy-to-understand, bite-sized video lectures and downloadable resources. Our online classroom which is open 24/7 as well as top quality lecturer support will help you make the most of your exams. FREE DEMO COURSES FOR UNISA MAC3701 We offer free DEMO courses that are jam-packed with enormous value. When you register, you will receive free access to the first study unit of each of our accounting and auditing courses. The following is included: • World-class study-aids • Free lecture videos • Free downloadable content • Free access to our online classroom
Views: 1475 Tabaldi Education
ABC&Customer Profitability P2 - Management&Cost Accounting - Spring 2013 - Professor Noel Cooperberg
 
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Lecture 8: ABC & Customer Profitability Analysis II Professor Noel Cooperberg (Chapter 5) The class begins with an example that shows the difference between volume-based and activity-based costing (the same company's information is displayed using both methods). In light of the results from the example, the benefits of using activity based costing are explained and discussed. Lastly, activity based management and costing tools are shown. Recap of topic (ABC & Customer Profitability Analysis): 0:13 Volume Based vs. Activity Based Costing (Example): 2:33 --- Method 1 --- Volume Based Costing: 3:55 --- Method 2 --- Activity Based Costing: 6:33 Benefits of ABC Systems: 14:10 Cost of Capacity: 15:33 Activity Based Management (ABM): 18:58 Activity Based Costing & Management Tools: 27:34 Customer Profitability Analysis (with diagram): 21:36 The benefits of using an ABC system (activity based costing system) include: (1) Better profitability measures due to more accurate costs (2) Better decision making (identify value-added vs.nonvalue added activities and associated costs). (3) Information for process improvement. (4) Improved cost estimation. (5) Helps in identifying and controlling the cost of unused capacity. Activity based management (ABM) manages activities to improve value to customers and increase competitiveness and profitability. Activity based costing (ABC) is the source of information. It improves management's focus on CSFs (critical success factors), thus improving competitive advantage as well. In activity analysis, we assess activities based on their value to the product / customer and their efficiency. Value added analyses eliminate activities that add little or no value; resource consumption can be reduced and the firm can focus on value added activities. High value added activities increase the value of the product or service. They are necessary to meet customer requirements enhance purchased materials or components, contribute to customer satisfaction, and are critical steps in a business process. Low value added activities consume time, resources, or space and add little to satisfy customer needs. They can be eliminated without affecting the form/fit/function of the product or service. Customer profitability analysis uses activity-based costing to determine the activities, costs, and profit associated with serving particular customers. A costly customer usually changes orders a lot, orders in small quantities, requires special packaging, demands fast service, and orders frequently. Customer profitability analysis helps assess a customer's value to the company. You must ask questions like what the growth potential of the customer and the customer's industry, what the cross selling potential is, what are the possible reactions of the customer to changes in sales terms or services, and how important is this customer as a future sales reference. Customer profitability analysis identifies customer service activities and cost drivers to determine profitability for each customer or group. It allows the firm to choose its customer mix, an appropriate offering of after-sale services, and what discounts to offer. Customer cost analysis is the first step in a customer profitability analysis. It identifies activities and cost drivers to service customers before and after sales. Customer costs should be classified into categories such as customer unit-level costs (resources consumed per units sold, like sales commissions and shipping costs), customer batch-level costs (resources consumed for each sales transaction, like order-processing costs or invoicing costs), customer-sustaining costs (resources consumed to service a customer regardless of the units sold, like monthly statement processing costs and collection costs for late payments), distribution-channel costs (resources consumed in each distribution channel used to service customers, like the cost of operating a regional warehouse or centralized distribution center), and sales sustaining costs (resources consumed to sustain sales and service activities that cannot be otherwise traced, like corporate marketing expenditures). Customer profitability analysis combines customer revenues and costs to assess profitability and identify actions to improve that profitability. Some companies quantify customer value through customer lifetime value (CLV) using the net present value (NPV) of all estimated future profits from the customer. Customer equity is the sum of CLVs for all customers, and is also a measure of total company value. To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Activity Based Costing, Customer & Direct Product Profitability
 
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Today I will tell you the Activity Based Costing, Customer & Direct Product Profitability. Activity-based costing (ABC) is an accounting method that identifies and assigns costs to overhead activities and then assigns those costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, overhead activities, and manufactured products, and through this relationship, it assigns indirect costs to products less arbitrarily than traditional methods read more: Activity-Based. Customer profitability analysis helps the company understand the net profit coming from each customer which can be calculated by revenue fewer costs. These costs are not only manufacturing and distribution costs but also sales costs, marketing costs, services cost and any other related costs which have to be undertaken to service the customer. Direct product profitability (DPP) is a method of measuring a product’s handling costs from the time it reaches the warehouse until a customer buys it in the retail store. #AcvityBasedCosting#CustomerProductProfitability#Direct Product Profitability #StrategicAnalysis#Operating Income
Views: 1492 StudyByTech
CPA MA Quick Summary -  Activity Based Costing & Customer Profitability Analysis Introduction
 
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HKU MA II Teaching Week 3 Pre-Lecture Introduction by Dr Neale O'Connor
Views: 1706 Tech Asia
Cost & Management Accounting: ABC & Customer Profitability Analysis (Part 1)
 
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Lecture 7: ABC & Customer Profitability Analysis Professor Noel Cooperberg (Chapter 5) After giving a brief introduction to activity-based costing, the Professor goes on to review key terms associated with the topic. Activity based costing is also compared and contrasted to volume-based costing. Afterwards, the method of developing an ABC system are developed, including activity analysis and the assignment of resource costs. NOTE: This video has been trimmed (and possibly still in the process of being trimmed). The markups below will no longer be accurate for this video. The markups will be fixed as soon as time allows. **Setup / Class Agenda: 0:00 - 6:14 Activity Based Costing Introduction (example): 6:15 Overview of Learning Objectives: 9:29 ABC vs. Volume Based Costing: 10:50 Volume-based Costing: 14:03 Review Question: 16:04 Activity-based Costing (key terms): 19:00 Developing an ABC System: 20:45 Activity Analysis (Step 1): 22:11 Assign Resource Costs (Step 2 & 3): 24:58 Question: 26:00 **Silence / students solving a problem: 26:31 - 31:23 Question Review / Solution: 31:24 Question: 42:11 ** = consider trimming. To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Activity Based Costing (with full-length example)
 
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This video explains the process of Activity-based Costing and illustrates how Activity-based Costing is used with an example. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 165241 Edspira
Activity Based Costing
 
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Activity Based Costing
Views: 259 PremierTrainingUK
Activity Based Costing
 
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Activity Based Costing review of in class problem 3-10
Managerial Accounting Activity Based Costing
 
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Activity Based Costing with worked example to compare with traditional costing
Views: 1593 david hopcroft
Costing Activity Based Costing
 
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Activity based costing example
Views: 2312 david hopcroft
Disadvantages of Activity Based Costing
 
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This video discusses several disadvantages of activity-based costing. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like Edspira on Facebook, visit https://www.facebook.com/Edspira To sign up for the newsletter, visit http://Edspira.com/register-for-newsletter Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin To follow Michael on Facebook, visit https://www.facebook.com/Prof.Michael.McLaughlin
Views: 451 Edspira
Intro to Managerial Accounting: Activity Based Costing (Chapter 5)
 
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Introduction to Managerial Accounting Professor Savita Sahay Activity Based Costing (Chapter 5) Please visit our website at http://raw.rutgers.edu TIME STAMPS Quick Review of Applied Overhead: 0:19 Practice Problem: 2:48 --- Calculating cost of each unit (job costing) Single Allocation Rate System Outdated: 4:00 ABC Features: 4:47 Practice Problem #2 (info given): 5:46 --- ABC question & solution: 7:15 Practice Problem #3: 9:15 --- Budgeted overhead rate and overhead cost per unit calculations --- Overhead Allocation: 10:26 Steps in Activity Based Costing: 13:00 Hierarchy of Activities: 13:37 Practice Problem #4: 15:14 --- Identifying unit, batch, product, and facility level activities Comprehensive Practice Problem #5: 16:41 --- Questions / Solutions: 17:26 Bottom Line - Simple vs. ABC [Conclusion]: 21:54 The applied overhead rate is a sinle, manufacturing overhead allocation rate using the following formula: Budgeted Manufacturing Overhead Rate = Budgeted manufacturing overhead costs / Budgeted Direct Labor hours. Allocating overhead costs to the job involves multiplying the budgeted allocation rate by the number of actual direct labor hours. Traditional systems were developed in 1800 and focused on simplicity because (1) direct labor information was already being recorded, (2) direct labor was a large component of product costs, and (3) managers believed direct labor and overhead costs were highly correlated. Simple systems often resulted in cross-subsidization, and incorrect costs lead to sub-optimal decisions. The single allocation rate system is outdated. Today, direct labor alone may no longer be a satisfactory base for allocation of overhead. Most companies sell a large variety of products that consume differing amounts of overhead. As a percentage of total costs, direct labor has been shrinking and overhead has been increasing. Many of the new overhead costs may not be correlated with direct labor. Technology advancements have reduced the cost and complexity of gathering diverse sources of data. In activity based costing, a number of allocation bases are used for assigning costs to products. A predetermined overhead rate is computed for each activity and then applied to jobs and products based on the amount of activity consumed by the job or product. It also calculates a more accurate product cost than traditional methods (by categorizing all indirect costs by activity, tracing the indirect costs to those activities, and assigning those costs to products by using a cost driver related to the cause of the cost). The steps in activity based costing involve (1) identifying and classifying each activity, (2) estimating the cost of resources for each activity, (3) identifying a cost driver for each activity and estimating the quantity of each cost driver, (4) calculating an activity cost rate for each activity, and lastly, (5) assigning costs to products based on the level of activity required to make the product or provide the service. The hierarchy of activities is as follows: (1) Unit level (output level) activities are performed each time a unit is produced (such as providing power to run processing equipment. (2) Batch-level activities are performed each time a batch is handled or processed, regardless of how many units are in the batch (such as setting up equipment and shipping customer orders). (3) Product-sustaining level activities relate to specific products and must be carried out, regardless of how many batches are run or units produced and sold (such as designing or advertising a product). (4) Facility sustaining level activities are carried out regardless of which products are produced, how many batches are run, or how many units are made (such as heating a factory or building rent). Examples of each type of activity: machine depreciation is UNIT level, setup costs are BATCH level, spare parts management is PRODUCT level, and property taxes / insurance is FACILITY level. Regarding simple vs. activity based costing, both methods are mathematically correct and acceptable. Each method yields a different cost figure, which will lead to different gross margin calculations. Only overhead is involved. Total costs for the entire firm remain the same - they are just allocated to different cost objects within the firm. Selection of the appropriate method and drivers should be based on experience, industry practices, as well as cost benefit analysis of each option under consideration. To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Views: 20801 Rutgers Accounting Web
How to do a Customer Profitability Analysis
 
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You can subscribe to all my Marketing Video Lessons here: http://30minutes.marketing/subscribe This customer profitability analysis video explains why and how to calculate it, and what you should do with the results. Visit My Website: http://30minutes.marketing/ Follow Me On Social Media: Linkedin: https://www.linkedin.com/in/paulocalisto Facebook: https://www.facebook.com/30minutesmar... Twitter: https://twitter.com/30MinutesMarket Customer Profitability Analysis assists business owners, entrepreneurs and marketing experts recognize the earnings coming from each and every customer. The Customer Profitability Analysis, is the net profit or to put it simply the revenue minus all the costs and expenses associated to one individual customer. This assists business owners or marketers in recognizing which customers bring more profit to their business. This understanding it is exceptionally valuable due to the fact that if used correctly will certainly increase the business profitability. At the above video, I will exemplify with a Spa business. Basically in this example a Spa will analyze their customer profitability and divide them into five different groups. When analyzing the data and segment it into five groups, it will come to the conclusion that the best customers, what I called on the example as the five star customers, are only 20% of their total customers but they actually drive 80% of the entire spa profit. This kind of information that a customer profitability analysis will provide is extremely important to any business who wants to be successful. Because most of the time you will understand that a small group of customers are extremely important to your business, and you need to continue to make sure that they keep using your products and services regularly, or even more than they used to. Besides that, you have the opportunity to determine what geographic, demographic and psychographic characteristics they have in common, and use your marketing dollars to drive more customers with the same characteristics to experiment your products. Also, you will have the opportunity to know the customers that are not as good as this 5 stars, but that are close to this group. Meaning that after you concluded analyzing your customer profiles, they are not at the 5 stars customer group but on the 4 or 3 stars groups. By knowing who these persons are, you will be able to build a relationship with them with some marketing tactics that have the goal of moving them into the 5 star customers’. This technique of “pushing” your existing customers into your best customers group, most of the times is easier and cheaper than try to find completely new great customers. Finding other prospective customers with the exact same qualities and attributes as them is also a smart way to spend your marketing dollars. Example: if they are sales professionals’ females that live in a kilometer distance from your shop, with ages between 30 to 45 years old, you should invest in marketing your products to ladies that have the exact same characteristics as your five star customers. This way, you will not waste your marketing money by promoting your products to customers that will bring you not much profit. For your “worst” customers, most of the times I recommend businesses to leave them alone and don’t waste their marketing dollars in trying to transform them into good customers. Often, after studying the customer profitability analysis, company owners recognize that these customers in reality don’t bring much profit to the company and in many cases they are not profitable at all, because when we calculate the net profit, our actual costs and expenses with them are higher than the revenue they brought to the company.
Views: 11147 Paulo Calisto
Activity Based Costing (Cost Hierarchy Categories, Cost Allocation Bases, ABC System Setup, Etc.)
 
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Activity Based Costing (ABC Cost Hierarchy) Place each Cost Pool into one of the categories: 1-Unit level - each unit of product is produced, 2-Batch level - each batch of products is produced, 3-Product level - support a specific type of product, 4-Facility level - maintaining the facility or plant & 5-Customer level - support a specific customer, ABC COST ALLOCATION BASE (1) Activities (Work or function provided), (2) Drivers (Causes the need for activities), (3) Activity Cost Measure (Unit of Measure), (Allocation base for applying OVHD Cost), a. Frequency (# times activity preformed, b. Duration (Time consumed performing activity), c. Physical (Qty. of resource processed by activity), detailed discussion by Allen Mursau
Views: 5495 Allen Mursau
Cost and Profitability Analysis
 
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Qubix's Paul Johnston and Oracle's Terry Jennings take a look at Profitability Management.
Views: 454 Qubix International
CPA MA Quick Summary -  Activity Based Costing & Customer Profitability Analysis Part 4
 
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Please watch: "Hoverboard Workshop" https://www.youtube.com/watch?v=PQmUlEhXfx0 -~-~~-~~~-~~-~- HKU Management Accounting II Teaching by Dr Neale O'Connor
Views: 237 Tech Asia
CPA MA Quick Summary -  Activity Based Costing & Customer Profitability Analysis Part 1
 
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Please watch: "Hoverboard Workshop" https://www.youtube.com/watch?v=PQmUlEhXfx0 -~-~~-~~~-~~-~- CPA Management Accounting Quick Summary - Activity Based Costing & Customer Profitability Analysis
Views: 1231 Tech Asia
Activity Based Costing | Financial Reporting Decisions| US CMA Part 1| US CMA course | US CMA Exam
 
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US CMA Exam Part 1 A method of cost accounting system To allocate indirect costs to cost objects Based on the extent to which cost objects use activities that consume resources More accurate allocation of overheads Overheads today are a huge component of the total costs Each company produces a variety of products An accurate understanding of costs of each product offers a competitive advantage wrt to pricing, product mix etc.. Results for more informed decision making https://meraskill.com/cma?utm_medium=referral&utm_source=youtube&utm_campaign=us_cma WhatsApp Now: +91 8692900017
Views: 700 Mera Skill
CPA MA Quick Summary -  Activity Based Costing & Customer Profitability Analysis Part 2
 
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Please watch: "Hoverboard Workshop" https://www.youtube.com/watch?v=PQmUlEhXfx0 -~-~~-~~~-~~-~- HKU Management Accounting II Teaching by Dr Neale O'Connor
Views: 306 Tech Asia
72.  Managerial Accounting Ch7 Ex Pt4: Customer and Product Margins
 
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Exercises: 7-7: Product and Customer Profitability Analysis 7-9: Computing Activity-Based Costing Product Costs Text Used Managerial Accounting Tenth edition Garrison et al. Publisher: McGrawHill
Views: 1666 Mark Meldrum
ABC&Customer Profitability - Management & Cost Accounting - Spring 2013 - Professor Noel Cooperberg
 
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Lecture 7: ABC & Customer Profitability Analysis Professor Noel Cooperberg (Chapter 5) After giving a brief introduction to activity-based costing, the Professor goes on to review key terms associated with the topic. Activity based costing is also compared and contrasted to volume-based costing. Afterwards, the method of developing an ABC system are developed, including activity analysis and the assignment of resource costs. Activity Based Costing Introduction (example): 0:40 Overview of Learning Objectives: 3:25 ABC vs. Volume Based Costing: 4:49 Volume-based Costing: 7:59 Review Question: 10:00 Activity-based Costing (key terms): 12:59 Developing an ABC System: 14:42 Activity Analysis (Step 1): 16:09 Assign Resource Costs (Step 2 & 3): 18:53 Question: 20:02 Silence / students solving a problem: 20:24 - 25:12 Question Review / Solution: 25:13 Question: 36:07 Costing is the process of accumulating, classifying, and assigning direct materials, direct labor, and overhead to products, services, or projects. Volume-based costing is often inadequate. Indirect cost allocation is based on volume of output. Indirect costs do not always occur in proportion to output volume. It provides no incentive to control indirect costs. Volume-based costing may cuase cross-subsidization. Some products will be over-costed, and others undercosted. Activity based costing uses detailed information about the activities that make up indirect costs. Outputs are charged based on resources consumed. Although it is often inadequate, volume-based costing may be okay to use if direct costs are the major cost component and if the activities supporting production are relatively simple, low-cost, and homogeneous across product lines. Industries that appropriately use volume-based costing include professional service and commodity firms. An activity is a specific task (such as production set-up). A resource is an economic element consumed in performing activities (like salaries and supplies). Resource consumption cost drivers measure the amount of resources consumed by an activity (for example, the number of labor hours to complete production set-up). Activity consumption cost drivers measure the amount of activity performed (for example, the number of batches to manufacture a product). There are three steps in developing an ABC system. First, identify the resource costs and activities (through activity analysis - know how they consume resources). Data can be collected from existing documents, records, questionnaires, observation, and interviews. Sample questions to ask include what work / activities do you do, how time time spent on activities, resources required to perform activities, what value does doing this activity add to the customer and organization as a whole. After asking the questions, classify the activities by the way in which they consume resources (unit-level, batch-level, product-level, and facility-level). Unit-level activities are performed on each unit of product or service (like direct materials). Batch-level activities are performed for each batch or group of units (like setting up machines). Product-level activities support the production of a specific product (engineering changes). Facility level activities support overall operations (like property taxes and insurance). Second, assign the resource costs to activities (use resource consumption cost drivers, like direct labor hours, setups, moves, machine hours, employees, or square feet, based on cause & effect to assign resource costs). Third, assign activity costs to cost objects (use activity consumption cost drivers like purchase orders, receiving reports, parts stored, direct labor hours, or manufacturing cycle time). To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Cost & Management Accounting: ABC & Customer Profitability Analysis (Part 2)
 
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Lecture 8: ABC & Customer Profitability Analysis II Professor Noel Cooperberg (Chapter 5) The class begins with an example that shows the difference between volume-based and activity-based costing (the same company's information is displayed using both methods). In light of the results from the example, the benefits of using activity based costing are explained and discussed. Lastly, activity based management and costing tools are shown. **Setup: 0:00 - 0:17 Current Events Related to Accounting 0:18 Recap of topic (ABC & Customer Profitability Analysis): 6:58 Volume Based vs. Activity Based Costing (Example): 9:23 --- Method 1 --- Volume Based Costing: 10:43 --- Method 2 --- Activity Based Costing: 13:19 Benefits of ABC Systems: 21:00 Cost of Capacity: 22:20 Activity Based Management (ABM): 25:47 Activity Based Costing & Management Tools: 27:34 Customer Profitability Analysis (with diagram): 28:20 **End Class ("Breakout"): 34:53 - 36:50 ** = consider trimming. To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Activity Based Costing Basics for ICWA- Royston Dias
 
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Activity-based costing (ABC) is 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 by each. This model assigns more indirect costs (overhead) into direct costs compared to conventional costing models. Aims of model With ABC, an organization can soundly estimate the cost elements of entire products and services. That may help inform a company's decision to either: Identify and eliminate those products and services that are unprofitable and lower the prices of those that are overpriced (product and service portfolio aim) Or identify and eliminate production or service processes that are ineffective and allocate processing concepts that lead to the very same product at a better yield (process re-engineering aim). In a business organization, the ABC methodology assigns an organization's resource costs through activities to the products and services provided to its customers. ABC is generally used as a tool for understanding product and customer cost and profitability based on the production or performing processes. As such, ABC has predominantly been used to support strategic decisions such as pricing, outsourcing, identification and measurement of process improvement initiatives.
Views: 1085 Royston Cajetan Dias
CPA MA Quick Summary -  Activity Based Costing & Customer Profitability Analysis Part 3
 
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Please watch: "Hoverboard Workshop" https://www.youtube.com/watch?v=PQmUlEhXfx0 -~-~~-~~~-~~-~- HKU Management Accounting II Teaching by Dr Neale O'Connor
Views: 258 Tech Asia
Activity Based Costing
 
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Views: 1722 ITSM NHL
Activity Based Costing Software for Excel
 
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ABC for Excel by MrDashboard.com Create Activity-Based Cost Analysis with one click in Excel. Fully automated and custom ABC Cost Analysis Reports based on your business. Improve profitability by knowing your real product, service and customer costs and net profit.
Views: 60333 Janet Samuels
Activity Based Costing Examples - Managerial Accounting video
 
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Activity Based Costing Example - Accounting video by TheAccountingDr is a tutorial video with examples on using an activity-based costing system: 1) calculate the allocation rate and 2) allocated costs (overhead/indirect costs) using the allocation rate. In addition, we calculate the indirect costs per unit of planned products as well as the product costs per unit of planned products (direct materials + direct labor + OH). Managerial Accounting lecture notes: http://tiny.cc/nw1enw Activity-Based Costing terminology review game: http://tiny.cc/mxgoow -- Thank you all for your wonderful support. Because of your support we have been able to reach and help numerous accounting students. Please continue to be a part of our mission to help other accounting students be successful by giving our videos thumbs up, giving comments and adding our videos to your favorites. Subscribe: http://www.youtube.com/subscription_center?add_user=routhwsuedu Friend me on Facebook and post your questions: http://www.facebook.com/TheAccountingDoctor -- For more accounting/how to eLectures (and accompanying lecture notes) similar to Activity-Based Costing Examples - Managerial Accounting video, blog, FAQs and accounting eBooks visit http://www.TheAccountingDr.com. Activity-Based Costing Examples - Managerial Accounting video: http://youtu.be/7SNjEHIYjns -- Please note that videos may require Flash media and may not play on devices without Flash capabilities (i.e. iPad). If you are having difficulty viewing this video on YouTube, these videos may also be viewed without Flash on my website at http://www.TheAccountingDr.com.
Managerial Accounting 2.5: Job Costing - Profitability Analysis
 
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This video describes how a job costing report can be used to evaluate revenue, product costs, and gross profit for individual jobs.
Views: 1082 KurtHeisinger
Activity Base Costing (ABC) -Details Knowledge of What is 'Activity-Based Costing
 
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What is 'Activity-Based Costing - ABC' Activity-based costing (ABC) is an accounting method that identifies the activities that a firm performs and then assigns indirect costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, activities and products, and through this relationship, it assigns indirect costs to products less arbitrarily than traditional methods. Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries are sometimes difficult to assign to a particular product produced. For this reason, this method has found its niche in the manufacturing sector. What is 'Activity-Based Costing - ABC' Activity-based costing (ABC) is an accounting method that identifies the activities that a firm performs and then assigns indirect costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, activities and products, and through this relationship, it assigns indirect costs to products less arbitrarily than traditional methods. Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries are sometimes difficult to assign to a particular product produced. For this reason, this method has found its niche in the manufacturing sector. What is 'Activity-Based Costing - ABC' Activity-based costing (ABC) is an accounting method that identifies the activities that a firm performs and then assigns indirect costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, activities and products, and through this relationship, it assigns indirect costs to products less arbitrarily than traditional methods. Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries are sometimes difficult to assign to a particular product produced. For this reason, this method has found its niche in the manufacturing sector. BREAKING DOWN 'Activity-Based Costing - ABC' Activity-based costing (ABC) is mostly used in the manufacturing industry since it enhances the reliability of cost data, hence producing nearly-true costs and better classifying the costs incurred by the company during its production process. This costing system is used in target costing, product costing, product line profitability analysis, customer profitability analysis and service pricing. It is also hugely popular since organizations can develop a much better corporate focus and strategy if costs are better grasped. Definition of Activities in ABC System The ABC system of cost accounting is based on activities, which is any event, unit of work or task with a specific goal — such as setting up machines for production, designing products, distributing finished goods or operating machines. Activities consume overhead resources and are considered cost objects. How ABC System Improves Costing Process Activity-based costing enhances the costing process in three ways. First, it expands the number of cost pools that can be used to assemble overhead costs. Instead of accumulating all costs in one companywide pool, it pools costs by activity. It also creates new bases for assigning overhead costs to items such that costs are allocated on the basis of the activities that generate costs instead of on volume measures such as machine hours or direct labor costs. Finally, ABC system alters the nature of several indirect costs, making costs previously considered indirect such as depreciation, inspection or power are traced to certain activities. -~-~~-~~~-~~-~- Please watch: "Budget 2018 Highlights India: Key points in Arun Jaitley presentation" https://www.youtube.com/watch?v=a37T8YcsJPI -~-~~-~~~-~~-~-
Views: 385 Tax King EPF Guru
2 min Demo: Activity Based Costing - CCH Tagetik Software Video Demo
 
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Watch this video to see how CCH Tagetik’s flexible built in Allocations engine can be leveraged to automate Activity Based Costing in order to achieve a more accurate measure of indirect costs as well as product/service profitability. Powerful what-if modeling, scenario playing and forecasting including predictive profitability analysis with CCH Tagetik corporate performance management software. Learn more on Modeling and Forecasting: http://ow.ly/QWwP30h3oFm
Views: 282 CCH Tagetik
Activity Based Costing
 
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16 minute video detailing activity based costing using the case study.
Views: 163 Bill Conner
Activity Based Costing (Part 2) 2nd Stage Allocation
 
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This video is the second part of a series that explains the process of activity-based costing. This video builds upon the example provided in the first video to illustrate how we can use activity rates to assign overhead to cost objects. It also demonstrates how activity-based costing can generate more accurate cost information to enhance decision-making. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Michael.McLaughlin To follow Michael on Twitter, visit https://twitter.com/Prof_McLaughlin
Views: 38785 Edspira
What is ACTIVITY-BASED MANAGEMENT? What does ACTIVITY-BASED MANAGEMENT mean?
 
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What is ACTIVITY-BASED MANAGEMENT? What does ACTIVITY-BASED MANAGEMENT mean? ACTIVITY-BASED MANAGEMENT meaning - ACTIVITY-BASED MANAGEMENT definition - ACTIVITY-BASED MANAGEMENT explanation. Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license. SUBSCRIBE to our Google Earth flights channel - https://www.youtube.com/channel/UC6UuCPh7GrXznZi0Hz2YQnQ Activity-based management (ABM) is a method of identifying and evaluating activities that a business performs, using activity-based costing to carry out a value chain analysis or a re-engineering initiative to improve strategic and operational decisions in an organization. Activity-based costing establishes relationships between overhead costs and activities so that costs can be more precisely allocated to products, services, or customer segments. Activity-based management focuses on managing activities to reduce costs and improve customer value. Kaplan and Cooper divide ABM into operational and strategic: Operational ABM is about doing things right, using ABC information to improve efficiency. Those activities which add value to the product can be identified and improved. Activities that don't add value need to be reduced to cut costs without reducing product value. Strategic ABM is about doing the right things, using ABC information to decide which products to develop and which activities to use. This can also be used for customer profitability analysis, identifying which customers are the most profitable and focusing on them more. A risk with ABM is that some activities have an implicit value, not necessarily reflected in a financial value added to any product. For instance, a particularly pleasant workplace can help attract and retain the best staff, but may not be identified as adding value in operational ABM. A customer who represents a loss based on committed activities, but who opens up leads in a new market, may be identified as a low value customer by a strategic ABM process. Managers should interpret these values and use ABM as a "common, yet neutral, ground … this provides the basis for negotiation". ABM can give middle managers an understanding of costs to other teams to help them make decisions that benefit the whole organization, not just their activities' bottom line.
Views: 490 The Audiopedia
ABC Costing theory.
 
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ACCA. F5 PERFORMANCE MANAGEMENT. CHAPTER SECOND.
Views: 126 Sudhir SiddiQue
Management & Cost Accounting (Activity-Based Costing) - Ephraim Sudit
 
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Management and Cost Accounting by Ephraim Sudit Activity-Based Costing March 14, 2013 **NOTE: AUDIO unclear in most parts; on & off** The Professor walks through a lengthy problem demonstrating an activity based costing system. Following that, issues that normally arise when attempting to implement an activity based costing system are discussed. After completing the discussion on ABC implementation issues, the Professor discusses the concept of tracing marketing costs to customers. ------QUICK NAVIGATION----- Answer to Case 2 Activity-Based Costing: 0:06 -- Requirement 1 (Compute the ACDRs in Table 4): 0:18 -- Requirement 2 (Compute the Activity Costs Assigned from Activity Cost Pools to the Cost Objects): 7:04 -- Requirement 3 (Compute ABC Profitability by product): 17:59 -- Requirement 4 (Compare Cooper's ABC Profitability Report to Cooper's Traditional Profitability Report. Discuss which Profitability Report is likely to be more accurate): 27:00 -- Requirement 5 (How can Cooper use its ABC Results to improve performance?): 27:03 -- Requirement 6 (If ABC results bring changes in Cooper's strategies, please design a procedure for estimating the value added of the ABC information to Cooper relative to the additional cost of ABC implementation? Please describe the major costs and value added components): 46:23 ABC Implementation Issues: 59:52 Answering students' questions: 1:01:07 - 1:05:52 Tracing Market-Related Costs to Customers: 1:05:53 Alpha-Beta Example: 1:07:04 ABC Customer Analysis: 1:22:22 To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Cost Allocation - Customer Profitability Analysis - Sales-Variance Analysis Lecture
 
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Cost Allocation, Customer Profitability Analysis, Sales-Variance Analysis Lecture
Views: 1847 Ed Kaplan
CPA - Strategic MA - W3 - Customer Profitability Analysis 2
 
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I take you through an additional example of customer profitability analysis from Chapter 14 - Cost Accounting - A Managerial Emphasis - Horngren, Datar and Rajan - 15th Edition
Views: 983 Tech Asia
CPA - Strategic MA - 5 ABC Costing Example
 
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Please watch: "Hoverboard Workshop" https://www.youtube.com/watch?v=PQmUlEhXfx0 -~-~~-~~~-~~-~- Example of how activity based costing can enable more accurate decision making
Views: 988 Tech Asia
Activity Based Costing (Example Using 5-Cost Pools For OVHD Allocation & Compare To Traditional)
 
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Activity Based Costing example applying ABC costing (example based on 5-activity cost pools & compares ABC costing to traditional single variable costing based on direct labor to determine overhead costs), Activity Based Costing is used to produce more accurate product costs than those obtained in the Traditional Cost systems (ABC is Based On Amount of Resources Used), Resource Consumption Model, Logic behind ABC Costing, 1-Products Consume Activities, 2-Activities Consume Resources, 3-Resources Generate Costs, What creates the demand for the output of each of the company's main activities ??, Allocate On Amount Used By Product, 1-Activities are identified, 2-Costs are traced to these activities (Activity Cost Pools) based on resources provided (Traced by Resource Driver),3-Costs are traced from each Activity Cost Pool to products (services) based on demands that each product (or service) has for each activity (Traced by Activity Drivers), A key idea in ABC is to find an activity measure for each activity that is closely related (correlated) to the activity costs involved (then applied to Product), detailed discussion by Allen Mursau
Views: 10354 Allen Mursau
Activity Based Costing (MAC)
 
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Activity-based costing (ABC) is an accounting method that identifies and assigns costs to overhead activities and then assigns those costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, overhead activities, and manufactured products, and through this relationship, it assigns indirect costs to products less arbitrarily than traditional methods. Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries, are sometimes difficult to assign to a product. For this reason, this method has found its niche in the manufacturing sector.
Views: 18 Siddharth Birje
Activity Based Costing Example
 
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Activity Based Costing demonstrated using a fictional manufacturer of frozen pizzas. For a copy of the problem go to https://www.dropbox.com/s/49k6xk1o7wq8r4a/ABC%20Vs.%20Normal%20Costing%20Example.pdf You can see the same problem demonstrated with Normal Costing techniques at https://www.youtube.com/watch?v=zdzgROBRFE0.
Views: 2215 Travis Martin
Managerial Accounting (Activity-Based Costing 1) - Divya Anantharaman
 
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Introduction to Managerial Accounting Lecture 10: Activity-Based Costing (Part 1) by Divya Anantharaman In this lecture, the professor begins with a review of defining costing system and job costing. The professor then continues with defining over-costing and under-costing, followed by an example. The professor then talks about profit, profitability, competitive pricing strategy, an activity-based costing overview, and definition of a few terms. Recap of previous class Define costing system; job costing: 0:06 What is Over-costing/Under-costing?: 3:05 Definitions --- Over-costing: 3:53 --- Under-costing: 4:10 Example: 5:24 Profit vs. Profitability; Competitive pricing strategy: 10:37 Activity-Based Costing: Overview: 20:44 Definitions --- Activity: 23:12 --- Activity List: 23:24; 23:59 Step 0 of ABC: 3 Basic Steps: 28:10 Allocation base: measure of activity; examples: 35:06 To receive additional updates regarding our library please subscribe to our mailing list using the following link: http://rbx.business.rutgers.edu/subscribe.html
Customer profitability analysis
 
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This video explains customer profitability analysis. It supports the book Management Accounting in Support of Strategy by Graham S Pitcher and university courses in management accounting and strategy. Music by www.bensound.com
Views: 514 Graham Pitcher
Increasing customer profitability
 
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Calculating customer profitability can be complex and requires detailed information, however a simple review is still very useful. Here's what you need to do...
Views: 429 nhatanhtuan
What is PROFITABILITY ANALYSIS? What does PROFITABILITY ANALYSIS mean?
 
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What is PROFITABILITY ANALYSIS? What does PROFITABILITY ANALYSIS mean? PROFITABILITY ANALYSIS meaning - PROFITABILITY ANALYSIS definition - PROFITABILITY ANALYSIS explanation. Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license. SUBSCRIBE to our Google Earth flights channel - https://www.youtube.com/channel/UC6UuCPh7GrXznZi0Hz2YQnQ In cost accounting, profitability analysis is an analysis of the profitability of an organisation's output. Output of an organisation can be grouped into products, customers, locations, channels and/or transactions. In order to perform a profitability analysis, all costs of an organisation have to be allocated to output units by using intermediate allocation steps and drivers. This process is called costing. When the costs have been allocated, they can be deducted from the revenues per output unit. The remainder shows the unit margin of a product, client, location, channel or transaction. After calculating the profit per unit, managers or decision makers can use the outcome to substantiate management decisions. Managers can decide to stop selling loss making products, to reduce costs for loss making customers or to increase sales in profitable locations. In profitability analysis it is possible to perform a Pareto analysis by ranking output units from most profitable to least profitable. By doing so it is possible to create a so-called 'Whale Curve', graphically showing the potential margin of an organisation.
Views: 699 The Audiopedia