The use of accounting methods ABC allows. ABC-Costing for practical use

Cost accounting method by function, orABC method(from the English Activity Based Costing - ABC), in essence, being an alternative to the order-based method of cost accounting and costing, it is effective for enterprises characterized by high level overhead.

Fundamental differenceABC method from other methods of cost accounting and costing is distribution of overhead costs.

The algorithm for its construction is as follows: 1) the organization's business is divided into main activities (functions, or operations). In particular, they can be: placing orders for the supply of materials; operation of the main technological and auxiliary equipment; operations for its readjustment; quality control of semi-finished products and finished products, their transportation, etc. The number of activities depends on its complexity: the more complex the business organization, the greater the number of functions will be allocated.

The overhead costs of the organization are identified with the identified activities;

2) each type of activity is assigned its own cost carrier, estimated in the appropriate units of measurement. In doing so, they are guided by two rules: the ease of obtaining data related to the cost carrier; the degree of compliance of cost measurements through the cost carrier with their actual value. For example, the processing of orders for the supply of materials can be measured by the number of orders placed; equipment changeover function - by the number of required changeovers, etc.;

3) the cost of a cost carrier unit is estimated by dividing the amount of overhead costs for each function (operation) by the quantitative value of the corresponding cost carrier;

4) the cost of production (work, services) is determined. To do this, the unit cost of the cost carrier is multiplied by their number for those types of activities (functions), the implementation of which is necessary for the manufacture of products (works, services).

Thus, cost accounting object with this method is separate view activity (function, operation), and object of calculation - type of products (works, services).

The order-to-order method, for the purposes of allocating overheads, takes into account the behavior of only one indicator, ignoring the influence of other factors on them (such as quality control and equipment changeover). Being faster and simpler, the order method can be used only when the influence of other factors on the organization's overhead costs is insignificant. Otherwise, the distortions are significant and the ABC method should be used. Using the ABC method allows you to take more effective solutions in the field of marketing strategy, product profitability, etc. Moreover, it becomes possible to control costs at the stage of their occurrence.

To effectively manage a business, company managers need to know:

1) what is the cost of individual services and their components (for example, the operations of receiving correspondence by a courier, tracking the movement of goods in the information system, issuing an invoice, etc.);

2) the provision of which services is more profitable;

3) which clients bring the company the minimum profit, which ones are unprofitable, etc.

This and other information can be obtained using the ABC method of cost accounting and costing. It allows you to understand how the services provided by the company, as well as the customers served by it, affect the volume of activity and how much different kinds activities consume resources. This, in turn, contributes to the management of not so much the costs themselves as the activities that consume these funds.

The algorithm for constructing the ABC method is as follows:

Stage 1. Definition of the main and auxiliary species company activities.

TO main activities include operations directly related to customer service. The cost of carrying out the main activities is determined by the nature of the order being executed.

Under ancillary activities understand those of its areas that are not directly related to customers or products, but which provide the necessary conditions for the normal existence of the main activities (for example, the functioning of the HR department, the department information support etc.).

Stage 2. Distribution of activities between departments.

Each department is assigned a code and the types of activities in which this or that department is involved are determined.

Stage 3. Selection of the distribution base for each cost item.

Using it, the costs are distributed among the activities of the company.

Thus, the wages of the company's personnel are distributed between individual activities in proportion to the time they spend. Some types of costs, without being distributed, completely transfer their value to a certain type of activity.

Stage 4. Distribution of departmental costs between activities.

Calculations are made in the form of special tables. The first column of the table indicates cost items (for example, staff salaries, fare etc.), in the second - the corresponding amount of costs for the year. For each type of cost, the percentage of their assignment to the corresponding types of activity is displayed and the costs for each type of activity for all departments are calculated.

Stage 5. Determination of the cost of each type of activity.

To do this, the data for all departments obtained at the previous stage are summarized.

Stage 6. Distribution of expenses for auxiliary activities between the main activities and calculation of the full cost of the latter.

Calculations are made in the form of special tables, the lines of which are the main types of activities and their cost, calculated at the previous stage. The columns of the table indicate the codes of auxiliary activities. Their cost is distributed among the main activities with the help of cost drivers.

Stage 7. Calculation of the unit cost of the cost carrier.

To do this, the total costs by activity, calculated in step 6, are divided by the number of cost carriers. The latter are taken from company statistics. As a result, the unit cost of each cost carrier is formed, i.e. the cost of one operation.

Step 8. Determine the total costs for the main activities related to a particular product or to a particular client.

To do this, the company's statistics on the number of cost carriers, depending on the line of business, are multiplied by the unit cost of the carrier.

The total costs for various activities are determined by summing the results obtained. Similar calculations are carried out in all areas of activity.

Stage 9. Calculation of the total cost of the company's activities.

Add "non-attributable" costs to total costs.

So, the ABC method contributes both to control over the level of expenses of the organization, and more good governance her profit.

The ABC system can be conditionally divided into two areas:

1) cost management;

2) profit management.

First direction allows managers to manage departments or processes more effectively. Understanding how the work of their departments is built and what factors determine the amount of this work creates the necessary conditions for eliminating overhead costs, and therefore reducing costs in general.

In this case, the subject of study and evaluation are individual operations (secondary activities) that make up the main activities.

The ABC method allows not only to analyze costs by categories of secondary activities, but also to determine which items of expenditure and in what proportion make up their cost.

Second direction is by no means limited to cost-plus pricing. Profit management rather consists in achieving a deeper understanding of what exactly is its source:

– what products;

– what kind of clients;

– what geographical segments;

– what are the commercial zones;

and how to change the commercial and market strategy to increase profits.

The ABC method allows you to evaluate the "contribution" of each client to the formation of the final financial result. So, a large client who sends correspondence often and in large quantities can actually bring only a minimal profit, or even turn out to be unprofitable due to the fact that the efforts and funds expended on it are not fully covered by incoming payments.

The availability of such information is necessary condition to make a decision for each client:

- how can you reduce the cost of servicing him, or increase the price for him and evaluate his reaction, or leave everything as it is and retain this client as obviously unprofitable, but prestigious, etc.

The Activity-based costing method, ABC (cost accounting by type of activity) was developed by American scientists R. Cooper and R. Kaplan in the late 80s and is now widely used in the West.

The ABC method is a technology that goes beyond just cost accounting and becomes efficient technology cost management. The three main reasons a business needs cost information are:

1. Inventory valuation.
2. Cost control and evaluation of the effectiveness of the enterprise (business areas, divisions).
3. Making managerial decisions, for example: What price to set?

What products to continue and what to stop? Produce or buy components?
The significance of the problems that managers solve places demands on cost information. If the costing system does not provide sufficient accuracy of the resulting estimates, the consumption of resources for individual types of products will be distorted, and then managers may refuse to produce profitable products or, conversely, continue to produce unprofitable ones.
Where cost information is used to establish the selling price, underestimating product costs can lead to profitable species activities, while overvaluation - to the release of products with inflated sales prices, for which there is no corresponding demand, and to the rejection of profitable activities.

CHANGES IN COST STRUCTURE

IN currently it is hard to imagine an industry in which there would not be a significant shift from the use of manual labor to the use of mechanisms and technology. In the cost structure, this change was reflected in the fact that labor costs decreased, and fixed costs increased due to increased depreciation of equipment.
In addition, the operation of modern production equipment is more accurate and optimal compared to manual labor, i.e. the amount of production waste and, accordingly, the amount of direct materials consumed decreases over time, which in turn leads to a further decrease in direct costs.
IN modern conditions there is also a constant increase in the costs of customer service, marketing, general management, personnel Management.
Thus, the share of overheads in total costs increases, so any change in the method by which overheads are allocated can have a significant impact on decision making.

DIFFERENT APPROACHES TO COST CALCULATION

The basic principle of cost calculation is the division of costs into direct and overhead1 and the assignment of both types of costs to products (cost object).
As a rule, in practice, there are no problems with the distribution of direct costs (they can be directly attributed to the cost of a particular cost object).
Overhead is more difficult. Traditionally, overhead costs are allocated to individual products in proportion to the size of labor costs, machine time (indicators characterizing the volume of production). However, this approach does not take into account the variety of operations that generate costs. For example, when allocating non-manufacturing overheads traditional method you can use the same machine hours that were used to allocate production overheads. The advantage of this method is simplicity, but the disadvantage is that there can be a significant difference in the consumption of resources required to provide services to certain consumers. Customer service costs can be related to the size and frequency of orders received, the distribution channels used, the size of the customer (large customers require additional services), geographic location of the consumer (it may be more difficult to deal with foreign buyers than with domestic ones). The ABC method avoids such errors.
feature ABC method is that in each specific case, other indicators (distribution bases) are used to allocate overhead costs, different from the volume of production. The ABC approach identifies the types of activities (processes, operations) that cause the occurrence of costs, and explores the main cost drivers for these types of activities.
Cost driver is a factor that best shows why resources are being consumed in a process a certain kind activities and therefore why this species activities lead to costs.
When activities and cost objects are defined, this information is used to allocate overhead costs to cost objects.
Example. Stone processing plant, specializes in the production of granite products. The applied technology for the production of granite products involves several stages:

1. Sawing a granite block into slabs (boards of various thicknesses - "semi-finished products" for the production of products).
2. Invoicing (grinding, polishing, etc.) of slabs (if necessary).
3. Sawing slabs into tiles, other products (according to the buyer's order).

The production of slabs and tiles is carried out in different workshops using the appropriate equipment.
The duration of sawing a granite block is on average 4.5 days.
Sawing up the block is carried out using metal shot (auxiliary material). Uneven consumption of shot in terms of time and quantity (technological reasons), the supply of a solution containing shot to the entire surface of the block, respectively, the impossibility of directly attributing the cost of shot per unit of sawn slabs determined their distribution.
Using the ABC method, we establish cost carriers (individual distribution bases) for shot consumption and some other operations (Table 1).
Naturally, the process of determining the main activities and cost drivers will be individual for each enterprise, since activity-based costing aims to best describe the behavior of costs.

DESCRIPTION OF THE STEPS RELATED TO THE APPLICATION OF ACTIVITY COST ACCOUNTING

The presented approach is a synthesis of ABC methods proposed and described by various specialists. In practice, the approach is being finalized (changed) taking into account the specifics of a particular enterprise.
Step 1. Determine the main activities (processes, operations) associated with production
Example. At the enterprise "O" the following types of activities related to the production of granite products can be distinguished: adjustment of equipment, transportation of raw materials and materials from a warehouse to production shops, checking the quality of manufactured products (figure). In the case of traditional accounting, such activities and the costs associated with them would be attributed to specific divisions of the enterprise (warehouse for raw materials and materials, quality control department, repair site). Although these transactions are not related to the volume of output, their costs would be allocated to all products using an inappropriate distribution base (related to the volume of production). As a result, distortions would arise and such information would be useless in making managerial decisions.
Step 2 Determine the costs (cost pools) for each activity identified in step 1. The purpose of this step is to determine how much the business spends on each activity identified in step 1.
Cost pool- grouping/combining individual cost items. Part of the resources can be directly assigned to specific types of activities, the other part (the cost of lighting and heating - indirect costs) using cost drivers to several types of activities. The greater the number of costs allocated to activities, the more approximate and less useful the cost information becomes.
In our case, the cost pools were: for setting up equipment - UAH 10.0 thousand, for transporting raw materials and materials from the warehouse to production workshops - UAH 35.0 thousand, for checking the quality of manufactured products - UAH 15.0 thousand .
In table. 2 provides information on the costs that form the cost pool of each of the business areas.

Cost Accounting Scheme by Activity

Tab. 1. Structure of total costs

Step 3 Define cost drivers for each activity identified in step 1.
Step 3 a. Select the cost pools and cost objects that will be used in this cost accounting system.
This step reflects the search for some compromise in the application of the cost accounting system by activity. Realizing that the ABC method is a somewhat complicated way of including costs in the cost price and taking into account the current time constraints on the spreading of costs using the ABC method (at a particular moment), in the example of cost allocation by business lines, as a conditional cost allocation base for determining the average cost per 1 m2 of granite tiles, we took the volume of production (Table 2).
Note that the outcome of the cost accounting process will always depend on the choice of cost object.
In the example with the costs of service departments (raw materials warehouse, quality control department, repair site), the following cost drivers are defined: for equipment setup - the number of adjustments, for the transportation of raw materials and materials from the warehouse to production workshops - the number of transportations, for checking the quality of manufactured products - the number of inspections of batches of products (figure).
Step 4 Calculate a specific cost-bearer rate for each cost pool.
To do this, you can use the following formula, which is similar to the formula for calculating the production overhead rate in the case of a traditional cost accounting system.

In the considered example of the distribution of costs by business areas (Table 2), the rate of the cost bearer for the cutting section was 81 UAH. (122.0 thousand UAH / 1500 m2).
Step 5 Apply the resulting cost-bearer rate to the products produced.
In case of adjustment of the equipment2, the total cost for the block sawing section will be UAH 299.3 thousand. or 111 UAH. per 1 m2 of sawn slabs.

• Direct costs for the section of strip sawing of blocks - UAH 294.0 thousand.
• Costs associated with setting up equipment for the block sawing section - UAH 5.3 thousand. (UAH 667 * 8 adjustments).

Once again, we note that the use of the ABC system is justified under the following conditions:

• When production overheads are high enough compared to direct costs, especially direct labor costs.
• When there is a wide variety of products produced.
• When there is a significant variety of overhead resources (indirect labor, indirect materials, etc.) used in the production of products.
• When the consumption of overhead resources does not directly depend on the volume of production.

The information generated by the ABC method can open up opportunities to increase profitability in a variety of ways, many of which are long-term. For example, the ABC method often reveals that small-scale products are relatively more expensive to manufacture and therefore unprofitable at current price levels. This situation can be resolved in several ways. The first way might consider stopping production of small batches and focusing on supposedly more profitable high volume products. Another approach may be to explore how the manufacturing process can be organized so that the cost of producing small batches of products approaches the costs of producing large batches.

One of the principles for calculating the cost of products (works, services) is the choice of a method for distributing indirect (overhead) costs between the objects of calculation. For a long time in domestic and foreign practice, the basis for the distribution of overhead costs was direct labor costs for the production of a unit of output, since they were easily planned and taken into account. Automation production processes and rising cost of infrastructure resources not directly related to production activities(expenses for the sale, adjustment and readjustment of equipment, technical control of products, etc.), contributed to an increase in the share of overhead costs in the cost structure and created the prerequisites for expanding the list of methods for distributing overhead costs.

Modern possibilities of automation of accounting and settlement tasks allow an economic entity to choose methods for distributing overhead costs, based on the specifics of their activities, and to coordinate them with methods of cost accounting and costing. At manufacturing enterprises, the following methods of cost accounting and costing are used: standard, custom, per-order, per-process, cost accounting by function.

Consider the features of the application of the order-by-order method and cost accounting by function. The use of both methods requires a reliable system in the enterprise production planning and control.

Custom Method

With custom costing the costing object is a single order, separate work , which are carried out in accordance with the special requirements of the customer and the lead time for which is relatively short. A separate analytical account is opened for each order, and until the end of the work, all costs are considered work in progress. When placing an order, accounting estimates are prepared.

An order passes through a series of operations as a continuously defined unit in a factory or workshop. Each cost unit is different from any other cost unit. If some orders are repeated periodically, the costs are determined anew. With a large variety of orders, work on each of them is carried out on production equipment for brief periods of time.

Cost information is accumulated separately for each executed order. The primary record for this information is the Order Fulfillment Cost Sheet/Sheet or Quote Card, which is completed on a case-by-case basis for all orders and is regularly adjusted to reflect any costs associated with a particular order. The calculation card is based on the construction of the type of calculation account.

Data about full cost for the execution of the order, entered in the cost accounting card, can be immediately analyzed in comparison with the information of any preliminary assessment made before the start of work on the order and indicated in the same card. Special purchases or other direct costs incurred are also recorded on the cost card.

As the order passes through the various production cost centers of the enterprise, each order receives its own share of the plant's production overheads. Accrual is carried out on the basis of the selected distribution bases.

The time spent on each order is taken into account in order shop orders or time sheets by the persons performing the work, estimated by the costing department, and the corresponding data is entered on the cost accounting card. After the order is completed, a surcharge is reflected in the order-based cost accounting card to cover the costs of sales and administrative costs. The agreed selling price is then compared with the total cost of the order and the financial results of this order.

A continuation of the order method is the contract method of costing, which is used in cases where the orders (contracts) in question are large-scale and their implementation provides for a long period of time (usually more than one year). Examples of industries where contract costing methods are used are mechanical engineering, road construction, etc.

Cost accounting by function (ABC method)

Apply costing by function or ABC-method also has a number of features. The object of cost accounting in this case is a separate type of activity (function, operation), and the object of calculation is the type of product (work, service). Fundamental difference ABC-method from other methods of cost accounting and costing is in the order of allocation of overhead costs.

Consider the algorithm for calculating the cost using ABC-method.

First, the main activities of the organization are distinguished - functions or operations. The number of activities depends on its complexity: the more complex the business, the more functions will be allocated. The overhead costs of the organization are identified with the identified activities.

For each type of activity, its own cost carrier is determined, which is evaluated in the appropriate units of measure. Wherein two rules must be followed:

• data relating to the cost carrier should be easily obtained;
• the measurement of costs through the cost carrier must correspond to their actual value.

For example, the equipment changeover function can be measured by the number of changeovers required, the order taking function by the number of registered orders.

Overhead costs are distributed per unit of output: the cost per unit of the cost carrier is multiplied by their number for those types of activities (functions), the implementation of which is necessary for the manufacture of products (works, services). As a result, all costs are summarized and the unit cost of a product (work, service) is determined.

Note! ABC- the method is effective for enterprises whose activities are characterized by a high level of overhead costs, and is an alternative to the order-based method of cost accounting and costing.

Example

We will calculate the cost of production using the ABC method and the order method and compare the results.

As an example, consider the virtual enterprise "Stack", which produces shelving structures for various purposes: cargo, archival and universal.

An analysis of the shelving manufacturing process revealed eight main functions (activities):

1) labor consumption;

2) ;

3) placing orders;

4) changeover of equipment;

5) delivery of materials;

6) ;

7) product quality control;

8) .

Each activity has its own cost driver. Table 1 presents data from accounting registers, distributed by type of activity and by type of product.

In order to form the cost of each type of rack structures, it is necessary to calculate direct costs and overhead costs.

We will calculate the direct costs for the production of each type of product. Table 2 shows the unit costs (columns 3, 5 and 7) and the volume of output of each type of product (column 2), on the basis of which the total costs of time, materials and labor costs are calculated.

The next step in the calculation is the allocation of overhead costs. To calculate the cost per operation, we divide the amount of overhead costs for each function (type of activity) by the number of operations for the corresponding cost carrier (Table 3).

Let's allocate overhead costs by type of product. To do this, we multiply the costs per operation (item 4 of Table 3) by the number of operations for each cost carrier (Table 4).

So, one cargo rack accounts for 10,359.07 rubles, for archival racks - 8539.17 rubles, and for universal racks - 3578.11 rubles. overhead.

The calculation of the unit cost of rack products using the ABC method is given in Table. 7.

Now consider the formation of the cost of production using the order method. We will choose direct labor costs as the basis for the distribution of overhead costs.

Let's calculate the budget rate of distribution of overhead costs (tab. 5). To do this, we divide the total amount of overhead costs (Article 2 of Table 3) by the working time fund (Article 4 of Table 2).

Direct material costs and wages, as well as the fund of time by type of product are known (Table 2). Calculate production overheads: multiply the budget rate of distribution of overheads by the time of manufacturing a unit of production. Let's determine the unit cost of each type of rack products (Table 6).

In table. 7 introduced comparative analysis results of production costing using two methods.

Summary

1. The order-based method allows you to quickly and easily allocate the organization's overhead costs, but it takes into account the behavior of only one indicator - labor costs per unit of production - and does not take into account the influence of other factors, such as product quality control. Therefore, the custom costing method should be used in cases where the share of overhead costs in the total cost is small, otherwise the distortion of the degree of influence of individual factors will be significant.

2. For an enterprise whose business process consists of a large number of operations, the ABC method is preferable. Its use will allow making more effective decisions in the field of marketing strategy, profitability of products, etc., because it makes it possible to control costs at the stage of their occurrence.

3. The correct assessment of the real cost is one of the levers for managing profits and business performance. And the definition of ways to reduce costs is the most important factor in the development of the economy of an economic entity.

I. N. Kostenko, Art. Lecturer, NOU HPE "Tomsk Institute of Business"

In recent decades, a new direction in management accounting has been actively developing in foreign theory and practice, covering costing (activity-based costing) and budgeting (activity-based budgeting). These systems supplement the management system based on the process approach (ABM-management, activity based management) or are used for other purposes. The information generated by the costing system "AVS-costing" is intended for strategic management decisions in the field of pricing and selection of promising products for production, for reengineering of business processes, etc. It can also be used for operational management. In this case, the ABC methodology for allocating indirect costs is introduced into the traditional absorption costing system.

We can talk about the evolution of the ABC costing system, since invented at the beginning of the 20th century. and forgotten for a while, the accounting tool received a new incarnation and development in the 1980s. There is a discussion about the history of the development of the ABC, so this problem can be taken as the basis for NIRS. The question of the origin of the ABC is debatable: is it a new phenomenon or a methodology forgotten for a while, born earlier? Two points of view can be distinguished. Representatives of the first are unanimous regarding the time of the creation of the ABC (80s of the XX century), but do not quite agree on the recognition of the authorship of the new accounting technology. So, J. Innes, F. A. Mitchell, Ya. V. Sokolov are called the creator of the LAN R. Kaplan; O. E. Nikolaeva adds R. Cooper; in the Oxford explanatory dictionary, the appearance of the LAN is associated with the publication in 1987 of the book by T. Johnson and R. Kaplan "Rise and Fall management accounting". However, adherents of a different point of view believe that the foundations of the methodology of the calculation system ABC-costing were formed in 1923 G. J. M. Clark in his work "A Study in the Economics of Overhead Costs".

Causes of ABC. The main reasons for the spread of ABC in practical activities companies are due to the following:

• 1) the role of the "total cost" indicator in the strategic business management and with the solution of the problem of reducing its conventionality;
• 2) a steady growth trend specific gravity in the cost of production of indirect costs;
• 3) diversification processes commercial activities business entities;
• 4) the fact that the accounting methodology using a single base for the distribution of indirect costs increases the degree of conventionality of the "full cost" indicator, since it often makes it impossible to establish a causal relationship between products and the resources they consume.

The first reason for the spread of ABC is associated with an increase in the degree of uncertainty in the business environment, risks and competition. Under these conditions, strategic management has acquired particular importance, for which information on reduced costs becomes irrelevant, since in a long period of time fixed costs take on the character of variables.

The degree of conditionality depends on the share of indirect costs in the cost of production, therefore, the trend of increasing costs for maintenance of production and management determined the second reason for the development of ABC. The justification for this trend and examples of the cost structure are discussed in paragraph 3.2 when characterizing the classification group "direct and indirect costs".

Why did the increased diversification of activities affect the development of ABC? If at the beginning of the XX century. enterprises specialized in a particular product, the increased uncertainty of the external environment and risks led to the process of diversification of activities, resulting in a significantly expanded range of products. This reduces the ability to identify consumed resources directly with products and requires improved cost allocation methodology.

Causes general would not be so significant for the further development of the methodology of calculation, if accounting techniques would be adequate to the new tasks of enterprise management. However, the approach adopted in accounting to the distribution of indirect costs in proportion to one distribution base does not allow reflecting a causal relationship between all groups of distributed costs and the object of calculation. Moreover, in practice, the distribution base is chosen based not on the logic of a causal relationship, but on the basis of the convenience of obtaining ready-made information from accounting registers.

ABC is a complex and time-consuming costing system. And despite the needs of management, it would not have received its development if it were not for the increased opportunities information technologies. The spread of ABC was ensured by a significant reduction in the cost of information processing in connection with the development of modern information systems.

The nature of ABC. One of the names of the ABC-costing system - two-stage costing - reflects an essential feature of ABC, associated with two steps in the distribution of indirect costs. The first step is the distribution of indirect costs among the operations of business processes, the second is the distribution but the final objects of calculation, for example, products. Here one of the fundamental differences between ABC costing and traditional costing systems appears, which is that the concept of "operation" is introduced into the accounting process, which is reflected in the name of the system - "activity-based costing", i.e. transaction costing. A business process activity is an event, task, or unit of work that has a specific purpose. ABC-costing uses the cost of these operations as an intermediate step for attributing costs to products (works, services) and as information of independent value.

The two-step procedure is a manifestation of one of the concepts underlying ABC costing. If, when using traditional costing systems, it is considered that resources are absorbed by products (Fig. 6.4, A), then in the ABC system, resources are absorbed by operations; then the cost of operations is absorbed by products (Fig. 6.4, b).

Rice. 6.4. The logic of the movement of costs in the traditional approach to costing (i) and in the ABC approach(b)

The ABC core vocabulary includes the following key terms:

• group of indirect costs;
• cost driver (otherwise cost carrier);
• intermediate costing object;
• final costing object.

The concept of "group of indirect costs" reflects the cost of the resources used (materials, etc.), which must be attributed to the objects of calculation, distributed in a certain way. This concept differs from the traditional interpretation of the "group of indirect costs" in that the ABC system distinguishes numerous groups of homogeneous indirectly distributed costs, in relation to which it is possible to find a cost driver that reflects a causal relationship between costs and calculation objects.

The key concept "cost driver" is similar to the familiar term "cost allocation base". From the point of view of the distribution technique, there are no differences - this is the amount in proportion to which indirect costs are distributed. From a concept standpoint, yes. The concept of "cost driver" refers to one of the provisions of the ABC concept: "indirect allocation procedures are carried out on the basis of identified causal relationships." Thus, the word "cost driver" means a causal relationship, a factor influencing the cost of the operation, then the final costing object. The term "distribution base", due to its too general nature, does not have such a meaning, especially if one takes into account the practice of many enterprises that use wages production workers.

The ABC costing procedure is described in paragraphs 4.2 and 7.2 in relation to solving specific problems.

Application practice. ABC-costing has a wide range of applications, including the rationale for decisions on assortment management, pricing, new product launches, selection client base based on the profitability of buyers, evaluation of the activities of responsibility centers, inventory evaluation. Information is used in budgeting, in reengineering of business processes.

Example 6.6 provides an overview of the practice of management accounting tasks solved on the basis of ABC; Example 6.7 shows the scope of the ABC approach to costing and control.

Example 6.6

The results of the review of the activities of companies using ABC-costing in their activities are given in Table. 6.11.

Table 6.11

Usage ABC costing companies

Example 6.7

The popularity of using ABC in various fields activity is visible from the review compiled on the basis of a survey of commercial companies and organizations (Table 6.12). Draws attention to the fact that industrial enterprises use the ABC approach less frequently than public organizations.

Table 6.12

Application ABC in various industries

In Russia, this approach to costing is beginning to gain popularity. For example, a frozen food business applied the ABC methodology to justify a strategic decision to outsource convenience foods; diversified enterprises, including those providing services in the field of IT - to determine the effectiveness of business processes and projects. However, there is no wide practice of applying this approach yet, while abroad it is used in companies.

ABC information can be used for both current management and for making strategic decisions. At the level tactical control this information can be used to generate recommendations for increasing profits and improving the efficiency of the organization. On a strategic level, as assistance in making decisions regarding the reorganization of an enterprise, changing the range of products and services, entering new markets, diversifying, etc. ABC information shows how resources can be reallocated for maximum strategic benefit.

The logic of the ABC system consists in a more detailed structuring of cost groups, finding cause-and-effect relationships formalized in cost and operation drivers. The capabilities of modern information systems allow you to perform accounting procedures quite efficiently. Prospects for the development of the ABC costing system are related to its use for evaluating the activities of responsibility centers; as well as an information basis for product development and technological processes. The last provision requires the integration of the ABC methodology and functional cost analysis.

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• Johnson H. T., Kaplan R. Relevance Lost: The Rise and Fall of Management Accounting. Harvard: Harvard University Press, 1987.
• Shank J., Govindarajan V. Strategic management costs: per. from English. St. Petersburg: Business Micro, 1999.
• The name of the costing system "activity-based costing" is translated by Russian researchers in different ways, for example, costing by type of activity, costing by operations, costing by functions, FSA, etc. Let us consider the applicability of these names based on the analysis of the essence of the activity-based costing method, and also the interpretation of the term “type of activity” that is customary for the domestic economy (the types of activity of a company are usually understood as, for example, the production of juices, building structures, etc.). The essence of the ABC method and its fundamental difference from other costing systems is not in the consolidation of accounting objects into types of activities, but in the fact that accounting objects are divided as much as possible into business process operations (naturally, taking into account the efficiency rule). Then the cost of these particles is synthesized either into the cost of production or into the cost of processes that were previously dissected. And these fractional components of the processes, which in turn consist of actions, become the objects of calculation.
• Managerial accounting 10th ed. South-Western Thomson Learning, 2003. P. 130.
• Louderback J.G., Holman J.S. Managerial accounting 10th ed. South-Western Thomson Learning, 2003. P. 130.

Continuing lighting innovative methods management accounting, this article will outline the basic principles of Activity Based Costing (or ABC) - a method that has become widespread in European and American enterprises of various profiles.

The name Activity Based Costing would be best translated into Russian as “work cost accounting”. The emergence and development of ABC corresponded to certain changes taking place in economic structure, namely, a change in views on the methodology of cost accounting and calculation of the cost of production. Previously, the calculation of the cost was carried out taking into account the constants (absorption costing) and variable costs(direct costing). In the first case, fixed costs are allocated to the cost of production, which thus reflects the full production costs. In the second, fixed costs are not included in the cost of production, but are written off as costs for the period. The cost of production in this case is equal to marginal costs. However, in practice, the activity of an enterprise inevitably requires a long-term attraction of resources in production, marketing, sales, and service. Therefore, despite the fact that, according to the calculations, the equality of marginal costs and income brings the maximum income, the use of the direct costing method is effective only under certain conditions. First, direct costs in the enterprise account for most of the costs; secondly, it must produce a narrow list of products (one or two types), each of which requires almost equal fixed costs. If the enterprise does not meet such requirements, cost indicators will inevitably be distorted.

Among the typical results of these distortions are such as underestimation of margins for small-scale products and overestimation - for large-scale ones, lower income indicators in financial accounting compared to managerial accounting, the apparent high profitability of technologically complex and innovative products compared to simple ones. Therefore, in order to solve the main tasks of management accounting - cost accounting and cost calculation, indicators of constant and variable costs were not very suitable.

The search for new methods for obtaining objective and reflective information about costs has led to the emergence of the ABC method.

In Activity Based Costing, an enterprise is viewed as a set of work activities. Jobs define the specifics of the enterprise. Works consume resources (materials, information, equipment) and have some result. Accordingly, the initial stage ABC applications is the definition of the list and sequence of work in the enterprise. This is usually done by decomposing complex work operations into their simplest components, in parallel with the calculation of their resource consumption. Within the framework of the ABC, three types of work are distinguished according to the way they participate in the release of products: Unit Level (or piece work), Batch Level (batch work) and Product Level (product work). Such a classification of costs (works) in ABC systems is based on the experimental observation of the relationship between the behavior of costs and various production events: the release of a unit of production, the release of an order (package), the production of a product as such. At the same time, another important category of costs is omitted, which does not depend on production events - costs that ensure the functioning of the enterprise as a whole. To account for such costs, a fourth type of work is introduced - Facility Level (general business work). The first three categories of work, or rather, the costs of them, can be directly attributed to a specific product. The results of general economic work cannot be accurately assigned to one or another product, therefore, various algorithms have to be proposed for their distribution.

Accordingly, in order to achieve an optimal analysis, resources are also classified in the ABC: they are divided into those supplied at the time of consumption and supplied in advance. The former include piecework wages: workers are paid for the number of work operations that they have already completed; the second - a fixed salary, which is negotiated in advance and is not tied to a specific number of tasks. This division of resources makes it possible to organize a simple system for periodic reports on costs and income, solving both financial and managerial tasks.

All resources spent on a work operation constitute its cost. At the end of the first stage of the analysis, all the work of the enterprise must be accurately correlated with the resources necessary for their implementation. Let us give an example (for simplicity of explanation, we will consider the cost item as the equivalent of a resource). In some cases, the cost item clearly corresponds to some kind of work.

“Salary of the Procurement Department” is included in the cost of the “Procurement” work operation. But, for example, “Office rent” should be distributed in proportion to the consumption by the work “Supply”, “Production”, “Marketing”, etc. It often happens that some resource cannot be correlated with a work operation and, therefore, is wasted.

However, a simple calculation of the cost of certain works is not enough to calculate the cost of the final product. According to ABC, the work operation must have an index-measurement of the output result - the cost driver. For example, the cost driver for the item “Supply” would be “Quantity of purchases”; for the article “Settings” – “Number of adjustments”. The second stage of application of the ABC is to calculate the cost drivers and indicators of their consumption of each resource. This consumption figure is multiplied by the cost per unit output of the work. As a result, we get the amount of consumption of a particular work by a particular product. The sum of consumption by a product of all works is its cost price. These calculations constitute the third stage of the practical application of the ABC methodology.

Presenting an enterprise as a set of work operations opens up wide opportunities for improving its functioning, allowing for a qualitative assessment of activities in such areas as investment, personal accounting, personnel management, etc.

Corporate strategy implies a set of goals that an organization wants to achieve. The goals of the organization are achieved by the performance of its work. Building a work model, determining their relationships and execution conditions ensures the reconfiguration of the enterprise business process for implementation corporate strategy. ABC, ultimately, increases the competitiveness of the enterprise, providing accessible and operational information to managers at all levels of the organization.

An even greater effect in cost optimization can be achieved by using ABC in combination with another methodology, namely Life Cycle Costing, the concept of life cycle cost accounting (or, in Russian equivalent, the concept of life cycle cost accounting). This approach was first applied in the framework of government projects in the defense industry. The cost of the full life cycle of a product – from design to end of production – was the most important for state structures indicator, since the project was funded based on the full cost of the contract or program, and not on the cost of a particular product. New production technologies have provoked the transfer of LCC methods to the private sector. There are three main reasons for this transition: a sharp reduction in the life cycle of products; increase in the cost of preparation and launch into production; almost complete definition financial indicators(costs and revenues) at the design stage.

Technological advances have shortened the life cycle of many products.

For example, in computer technology the time of production of products became comparable with the time of development. The high technical complexity of the product leads to the fact that up to 90% production costs determined at the R&D stage. The most important principle LCC can thus be defined as “forecasting and managing the cost of producing a product at the design stage”.

This approach clearly illustrates the commonality of approaches in various sections of cost management. For example, if the LCC mandates that costs be managed at a given stage production cycle taking into account the following, then the strategic cost analysis with the same goals considers not just the value chain within the enterprise, but the complete industry value chain (DSP). Relatively strategic analysis costs were given examples that reveal the need for a comprehensive analysis of DSP. For LCC, the situation can be illustrated as follows.

The plant produces three types of products: A, B, C. At the stage of designing a complex technical product A, the issue of the volume and level of detail is decided. technical description. Let's assume that the development detailed instructions maintenance will cost 250 million rubles. Plus, the publication for each set of equipment is another 7 thousand rubles. Moreover, the presence or absence of instructions will not affect the sale price (1 million rubles) in any way, since warranty obligations include service with a visit to the customer. That is, the consumer will not be very interested in the accompanying documentation because of the confidence in technical support. The service department of the enterprise works on a salary basis and the cost of maintaining it is 50 million rubles per month.

It follows from the condition that the product life cycle at our enterprise consists of the following stages:

Design;

Production - estimated circulation of 10,000 items in two years;

The use of traditional management accounting methods - marginal analysis - prescribes to refuse to issue maintenance instructions, as this will lead to an increase in marginal income by 7,000 rubles per unit of output. If we include development costs in the cost price, then the effect will increase by 250,000,000/10,000 = 25,000 rubles.

The application of cost management methods prescribes to analyze the impact of issuing / not issuing instructions on costs throughout the life cycle of the product. Regarding our example, it is necessary to consider the service maintenance stage, that is, to evaluate the impact management decision design stage to service stage costs. This is where the fundamental difference between simple cost accounting and cost management comes into play.

In the marginal analysis, we took service costs as a constant value and did not include it in consideration because of its insignificance in relation to the decision being made. In terms of cost management, this is a serious omission. Accepted into the analytical scheme service maintenance will require the solution of the following tasks: determination of factors affecting service costs (cost drivers); allocation of service costs to the cost of the product life cycle in proportion to the consumption of the cost driver; calculation and analysis of the costs of the life cycle of the product, taking into account changes in its design (the appearance of instructions).

The volume of tasks shows the need for a comprehensive application of cost management methods. In this case, to use LCC analysis, it is necessary to rebuild the cost accounting technique - to apply ABC.

Let the cost driver for the activity of the service department be the number of calls per month. The average cost per call is 40,000 rubles (average travel costs plus staff hourly rate multiplied by average call time). The average number of calls is 1000 per month and they are distributed as follows:

product A (issue without service instructions) - 600; item B and C, 200 each (with instructions).

The difference of 50,000,000 - 40,000 * 10,000 = 10,000,000 rubles between actual and estimated costs is a reserve: the maintenance of an additional 2 managers for emergency cases. By allocating the variable component of service costs to the cost of products in proportion to the use of the cost driver (and not to the volume of output or the size of direct production costs), we get an increase in the cost of product A by 40,000 * 600 = 24 million rubles per month. Using the ABC accounting technique, one can estimate the impact of the preparation of instructions on the total amount of costs.

From the experience of manufacturing and servicing products B and C, it follows that the release of operating instructions will reduce the number of calls from 600 to 200 per month, that is, it will lead to a reduction in service costs by 400 * 40,000 = 16 million rubles per month. Life cycle product A is 2 years, so service costs will decrease for the entire cycle by 16 * 24 = 384 million rubles. The total additional costs at the design and production stage will amount to 250,000,000 + 7,000 * 10,000 = 320 million rubles, which is 384 - 320 = 64 million rubles lower than the savings on service. Thus, the joint application of the LCC and ABC methods revealed the need and effectiveness of issuing operating instructions.

Successful work in the conditions of global competition requires not only constant updating of the range and quality of products, but also a thorough analysis of the enterprise's activities to reduce unnecessary or duplicated functions (works). Often, enterprises, pursuing the goal of reducing costs, adopt a policy of total cost cutting. Such a solution is the worst, since under such a policy, all work is subject to reduction, regardless of its usefulness. A general reduction can reduce the performance of essential work, which will lead to a deterioration in the overall quality and productivity of the enterprise. A drop in productivity will lead to another wave of layoffs, which will once again reduce the efficiency of the enterprise. Attempts to get out of this vicious circle will force the enterprise to raise costs above the initial level. The ABC methodology, combined with value chain analysis, allows an enterprise not only to reduce costs line by line, but to identify excess resource consumption and redistribute them in order to increase productivity.