Page 377 - Accounting Information Systems

348 PART II Transaction Cycles and Business Processes

Phil Johnson, the shipping supervisor, told the team a. The first three steps in an activity-based cost
what he felt drove the activity of the shipping department: implementation are to define the resource catego-
ries, activity centers, and first-stage resource driv-
‘‘The volume of work we have at the shipping ers. These steps have already been completed at
department is completely dependent on the num- ACC, and the results are displayed in Figure 1 for
ber of trucks we load. Recently, we have been fill- Case 6. Using the information from the case, per-
form the next step for the implementation team and
ing more trucks per day with less volume. Our
determine the second-stage cost drivers ACC
workload has increased, not decreased. We still
should use in its ABC system. Support your
have to deal with all of the paperwork and admin- choices with discussion.
istrative hassles for each shipment. Also, the b. Using the second-stage cost drivers identified in part
smaller trucks they use these days are side- (a), compute the new product costs for Products 101,
loaders, and our loading docks are not set up to 102, and 103.
handle these trucks. Therefore, it takes us a while c. Modify Figure 2 for Case 6 and include the cost driv-
to coordinate our docks.’’ ers identified in part (a).
d. Compare the product costs computed under the cur-
Once the interviews were complete, the team went to rent cost accounting system to the product costs
the systems department to request basic product infor- computed under the activity-based system.
mation on the three products ACC manufactured. The e. Explain the differences in product cost.
information is shown in Figure 3 for Case 6.
f. Given the new information provided by the
ABC system, recommend a strategy ACC
Required should pursue to regain its margins, and
The team has conducted all of the required interviews and comment on specific improvements that
collected all of the necessary information in order to pro- would reduce ACC’s overhead burden in
ceed with its activity-based costing (ABC) pilot study. the long run.