Colombo frozen yogurt case study solution

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 keeping 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 Accounting 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