Activity Based Costing 13

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Activity Based Costing Case
David Welch
University of Phoenix
Accounting Capstone
Tom Myers
February 1, 2010

The selection of the right cost calculation method is of critical importance when it comes to determining the real product profitability. Activity Based Costing is one approach that can be used. Activity based costing is a managerial accounting system that determines the cost of activities without distortion and provides management with relevant and timely information (Dunn, 2009). This paper will briefly summarize Colombo’s competitive environment and General Mills strategy in response to that environment, using the ABC analysis, Team A will determine new segment
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(To be compared with the traditional cost allocation). Actual Use of Total Cost Drivers per Product
Activity Cost Pools SG&A Cost Drivers Impulse Yogurt Cost Drivers Costs Per Activity Segment Shops
Selling Time to Yogurt % Time 1,185,000.00 100% 99% 1% Activity Cost Pools SG&A Cost Drivers ABC Cost Costs Per Activity Per Selling Time
Selling Time to Yogurt 1,185,000.00 100% 1185000 Cost Drivers per Segment:
Activity Cost Pools Impulse ABC Cost Yogurt Shops ABC Cost Segment % per Selling time Cost Assigned Segment per Selling time Cost Assigned Total
Selling Time to Yogurt 99% 1185000 1,173,150.00 1% 1185000 11,850.00 1,185,000.00

As shown in the previous Exhibit 1, the company recorded for cost of goods sold (COGS) $3,000,000 of Pick/Pack shipping costs during the year. Under this Pick/Pack shipping activity the company is recognizing

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