7/28/2019 California Creamery ( Presentation on ABC Costing Method)

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Presented By : Group 1Abhijeet

Abhilasha

AbhishekAmit

AnjaliArpita

7/28/2019 California Creamery ( Presentation on ABC Costing Method)

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CALIFORNIA CREAMERY, INC. CALIFORNIA CREAMERY, INC. owned 14 retail outlet stores.

They offered 25 different flavours of high quality ultra premium ice-cream.

Initially the company produced ice-cream in the garage ofcompanys founder but later grew and leased a building to houseCCIs production activities.

CCIs most significant production cost were for its raw materials.

CCIs 2004 budget included manufacturing Overhead of $600000.

CCIs total Direct Labour cost was $300000 and charged overhead toproducts at a rate of 200% of Direct Labour cost.

Then the owner was instructed to re-estimate product cost usingActivityBased Cost.

7/28/2019 California Creamery ( Presentation on ABC Costing Method)

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Activity Based CostingActivity-based costing (ABC) is a costing

methodology that identifies activities in anorganization and assigns the cost of each activity withresources to all products and services according to theactual consumption by each. This model assigns moreindirect costs (overhead) into direct costs compared toconventional costing models.

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Activity Driver Rate

Activity Driver Rate = Budget Cost / BudgetVolume

Calculation

http://localhost/var/www/apps/conversion/tmp/scratch_10/california%20creamery.xlshttp://localhost/var/www/apps/conversion/tmp/scratch_10/california%20creamery.xls

7/28/2019 California Creamery ( Presentation on ABC Costing Method)

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Traditional (vs) ABC Traditional

Direct Material

Direct Labor

Set of all Material Overheads

ABC

Direct Material Direct Labor

All the Overheads SeparatelyCalculation

http://localhost/var/www/apps/conversion/tmp/scratch_10/california%20creamery.xlshttp://c/Users/SCHOOL/Desktop/california%20creamery.xlshttp://c/Users/SCHOOL/Desktop/california%20creamery.xlshttp://localhost/var/www/apps/conversion/tmp/scratch_10/california%20creamery.xls

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ConclusionHere in the given case :

For Polynesian Fantasy,

For Vanilla,

ABC is better as it gives the actual cost.

Traditional Method Activity Based Costing (ABC)

5.60 9.07

Traditional Method Activity Based Costing (ABC)

5.40 4.64

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