VOLUME BASED COSTING VS ABC

Cost."'

ABC ("IT,,, Bean I", ,( UI. pnJ<'I:C> ...s J."nbuloa \Jrl(t) "I
coflee, ( III buys 000..., be n. (rom ",,,,,...s tbe ""rid ond N<bU. bkD<l, .nd J'lcDj!O 'hnn fot
"""Ie ("U' remly the lirm ,,(fon I) ,~,IT<
..., '0 gourmet ,bpI" .n o...,.""u...s h4' lltc major c<"1
~thro.;, n~lcria.b: b,"",!,."\t:r.iii; SU~..lnlgl amowuof ("~h.lt~
O\aJx:ad., rncurT'Cd In tIx rrt'd~ml.
D!ID'I~
.u ..,mated """IIn,;ood pod.n# "",,'010. lltc __~ """"n:wl\d~ huk dtn-ct Ial><>,
!x"""p( ",",colT"" MC\<1) popu4r ...s sdlm ""'" """"-3 r... P( II>< .....wbnnJ, ""C
\"11 ,,'" \I,IUlllC>.CBI rr.: .. 11.>
al fuJI pro<I...~ co-t, mdu.lin~ .u,,,,,,II O\~.
rlo>.
markup ~'f
j()' " If ,t.. pfl~'" r"fCt:rh&111
c\l&l~;a:rc ~"Wnlfk;dntl~ hl~heI lh..1n tbe man.a. ( 01 "",,-.
erv il' rn,,'C..,-The tll:'Oll'l\)\ compete- J"tnwN) 010the qualll\ 0( its J'i'OOtK" bul ru.,"IOmc" are
prh.."'C'4.'\lll~US as \\('11
0 .... for <be ~D ...... ~I mdudc
O\~
0( ~l.C(JQQo_'J
....... 11 hlo.. ~
alkx"'ed
b~It" current C(bt1J1r '~~lem 00 the h>a,.'10 0( cadi prod1A."'l\ d:J:reclbb.." c"""'. ~ buJrncd
direct 1 1><" cost (or ~Illl'owb S(.I(IJMMIlltc flID! bu<lf<led S6.llOO.IJIIO f<>rpu~
~...s u>c
of dm.."C1
,ndteriaJ!'o (nlo'll) coffee bcoln,,).
The h..d~
direct ",,,,-, (or on<-l'''unJ """ or ",,0 P( lbe 00IDp.u1) ~>
fot""'~

5-13 Volum,Based

.-00...,

'''"UlI)

prod""', ......

D,rect miitenals
D"U~llobor

car....;'Onll"llff~~toru

(1,n ~n
1h.JtIt.. "UrrenJ pmd~1~~
.)"lIcm ,,~uJd be pr1J\tJtnJ
ml\k .,linr~)"l infNm.i .",_ Sbr: h;." dc\~
this anal}'II" ,t( the ~Il -' budJCfoJ (a.."tc.lf') 0\0head \:'-"",:

Cost Dri.er
Pure"'" orders
Setu~

~cli.lly
Purchasino

Ma,enal, hand-..g
QUDIIlY

BI".,..

control

Roasung
Blending
PackagIng
Totoliaetol'( OII.mtld cost

Budo.. ed Ac:1i.ily
1.158

Budgered COli

I""

519.000
nII,OOO

144,000
.1.000
336.000
26(1000

nil

RoUI"'9lrau,"
BI.nd,nghoulI
Pick O"'Vhours

111)

33.600

26.000

$3.OIJ).OOO

1''''''''''''''''

".b)...., .....
0- tbere

<,r

1<~."~HlI!
the :!II III
.,r ,.." 11<10..... \I""" I,,. ...s
1:0.
n,' 1~)lInnlnor cnJlniJ,~'f't\:1 mncnu .. In\c"I'''M) h.'r Cltha or .I'k.~\-"{'Ifro.
OJI.

Budglled .. Ies
Bitch Ill.

Setups
Pureh... order ,ill
Ro"bngt,m.
Bllnd.ng
Plchgong IlII'e

""'t

M... al.1
IIJ).OOO..

MillY''''
..Is

2.lJIJ)

pouna.

500_",

10.000 pouods
3"., bI,eh
25.000 pounds

3".r blleh

1hour PI' III) pounds

05h ... ,,., 'II)POUnc!'
o I hour,., 111) POUnd.

ns hour PI< III)

500 pounds

_od.

I hour pet III) pound,

o Ihour per lODpounci.

Required

1 lJ'tll, C'l\ncr< IkoSn 1m' \ current prltdu,t \:"'tln~ \~..Inn.

u. Determurc t he ","'lmJ"l.u,} .~ rrcdc:h:mUnfo.'\I il\Cmt:.ad nuc u~n, cJU't:\:1 Lah-,r

\:(~l JS

the 'Inple

cn~1

driver,
1"'l''C)Q(0"< l"'u,l<I"f \I""" I '" .,>lr", .,n<! one po,u,,,1
of \I.,L" ".10",IT""
1 ""'n~ an '''l\,t)b;J>C<!" ...un r"......
'h. o.I,"\.I"p~"'" 1''''''1..:1.xnt r,,, ..... ""un.! of \Inn . I.oa
,,,,fTee , nne round vI' ~1"111)".10<,,11 ,\line-dl<.11 (>,hc,,0.1 .. ,," to the IIkl.t1tMll'ound,of
II,IPIIII I ""uno.l the 2.tX~1","lilli, of \1.11.,)".10 Compdlc ,II,rc,uh, ""il Ill..se on ''I."qllll","cnl I
\Vhoal are Ih4: unpli,'olliufl' or I1\< t\<II\!l) b..,,<cJ ""kIln, ~)"It:m \\tth m",1
ro ("81\ t"lnc.:ll1!t 111110.1

b. I)\:(crmlll< Ihe lull pmUlI'( co, ... and ....ihll~

,"d

r I'\\(ju~\ n11\ "rJII!1t1o"

I h~

doe..

\0<" ....sJ

I,)

t' 81\

.,;',.n'rctlll\ ....",d\oInt,'4:'