Colombo Frozen Yogurt Case Study using Activity Analysis

Group Exercise Using the Chart of Accounts view of the receiving department, coupled with the activity analysis and the following interview develop activity costs for the receiving department . Receiving Department Interview Supplies – Approximately 60% of our supplies budget is spent on receiving forms. The rest is 10% for move tickets and 30% for expedite forms. Depreciation – I know $6,000 is for the forklift. The rest is for the PC we use 50/50 between logging receipts and keep ing track of expedites. Overtime – That’s easy. It’s all for expedites. Salary and Fringes – 40% of our time is spent receiving material, 40% moving material, and 20% expediting material. All other – The rest of the budget is not really traceable to any of the activities. Why don’t you spread it on the time percentages? To Do 1. Trace each cost to the activities. 2. Calculate the gross cost of each activity and the cost of each output measure. 3. Contrast the traditional Chart of Accounts view to the Activity A ccounting view. Activity Define Value/Non -Value Define Business Process Primary or Secondary Receive Material Value Procurement Primary Move Material Non -Value Manufacturing Primary Expedite Material Non -Value Procurement Primary Trace Cost to Activities (Activities Consume Cost) Chart of Accounts View Activity View Receiving Department Tracing Method Receive Material Move Material Expedite Material Supplies $10,000 Percent % Depreciation 8,000 Analysis Overtime 5,000 Analysis Salaries 40,000 Time % Fringes 10,000 Time % All Other 5,000 Time % Total $78,000 Determine Output Cost ACTIVITY COST TYPE VOLUME COST Receive Material # of Receipts 500 Move Material # of Moves 200 Expedite Material # of Expedites 100