Activity Based Costing for Olah Bhd

MANAGEMENT
ACCOUNTING

Table of Contents
Question 1. define Activity Based Costing for Olah Bhd...........................................................1
Question 2. Evaluate contribution, sales level, break even point................................................2
Question 3. Preparation for budgets for Aliza Ltd for all Quarter of 2015.................................4
Question 4. Balance Scorecard for director of school to set bench-mark...................................6
REFERENCES................................................................................................................................8

Question 1. define Activity Based Costing for Olah Bhd
Activity Based Costing(ABC) system- in is tool that is used in inventory management to
assign resources on time, quantity and rate bases (Hill and et.al., 2019). It will help to attained
efficient cost for material allocation and make inventory management easy for company (Keel
and et.al., 2017). There are some advantage of ABC system. It also make company to allow to
sustain for long term with facing market competition effectively.
It provides way to determine realistic cost for product.
 Allows firm to make comparison between two cost same level of production activities.
 Make functioning of production effective and cost-efficient.
 It help to make better decision about production, pricing, promotion and selling
activities.
 Helpful in finding idle capacity of labor and machinery for improvement.
(a)Company need to assign RM600000 through ABC system on allocation time base
Activity % of time Spent Assigned cost Quantity Cost rate
Handle customer
order
50.00% 300000 5000 60
Process customer
complaints
35.00% 210000 700 300
Perform customer
credit check
15.00% 90000 600 150
(b)Assign RM 6,00,000 on 30,000 hours
Activity Hours Assigned cost Quantity Cost rate
Handle customer
order
2 hour 85714 4286 20
Process customer
complaints
7 hour 300000 15000 20
Perform customer 5 hour 214286 10714 20
1

credit check
(c)COST ASSIGN
Activity Quantity Rate Assigned cost
Handle customer order 5000 20 100000
Process customer
complaints
700 20 14000
Perform customer
credit check
600 20 12000
(d)measure for idle capacity-
Idle capacity are the used resources that can be used for production and get optimum use
of total capacity. Olah Bhd's manager need look into idle cost he need to make proper allocation
for production overhead to used full capacity. Budgetary tool is the best way to find idle
capacity and making planning for that.
Question 2. Evaluate contribution, sales level, break even point
(a) contribution margin-
It is a part of marginal costing that allow company to define fixed and variable cost,
profit margin etc. contribution as the formula given it is different between sales and variable cost
or it can be defined as gross margin. It is the increment money that generated for product sold.
Some advantage of contribution margin-It helps in price determination and volume of
production that is need for achieving sales target. It also provides relation with variable cost and
fixed cost in allows firm to make better production function in terms of cost.
Contribution Margin= per unit sales- per unit variable cost
1. Sales per unit- 300
2. variable cost = 150+30(selling and distribution expenses)
Contribution=120 per unit for January 40% of sales
2