Tax Shield Education Pvt. Ltd.

Cost Accounting-

Activity Based Costing (ABC)

The emergence of ABC systems During the 1980s the limitations of traditional product costing systems began to be widely publicised. These systems were designed decades ago when most companies manufactured a narrow range of products, and direct labour and materials were the dominant factory costs. Overhead costs were relatively small, and the distortions arising from inappropriate overhead allocations were not significant. Information processing costs were high, and it was therefore difficult to justify more sophisticated overhead allocation methods. Today companies produce a wide range of products; direct labour represents only a small fraction of total costs, and overhead costs are of considerable importance. Simplistic overhead allocations using a declining direct labour base canno t be justified, particularly when information processing costs are no longer a barrier to introducing more sophisticated cost systems. Furthermore, the intense global competition of the 1980s has made decision errors due to poor cost information more proba ble and more costly. Over the years the increased opportunity cost of having poor cost information, and the decreased cost of operating more sophisticated cost systems, increased the demand for more accurate product costs. It is against this background tha t ABC has emerged. ABC, however, is nor a recent innovation. Fifty years ago Goetz (1949) advocated ABC principles.

The main steps are Step 1: Identify the chosen Cost Objects ( product, service or customer ) Step 2: Identify the Direct Costs i.e. Prime cost of the Products, service or customer Step 3: Select the Activity Bases. Step 4: Identify the costs associated with each Activity. Apply Allocation & Apportion Technique Step 5: Compute the Rate per cost driver. Step 6: Compute the Indirect Costs of the Products = activity for the product rate per driver. Step7: Compute the Total Costs of the Products = Direct costs + Indirect Costs.

Activity Machine set-up Purchase materials Warehousing Material handling Inspection Quality testing Receiving material Packing Store delivery Line item ordering

Cost Driver Number of production runs Number of orders placed Items in stock Number of parts Inspection per item Hours of test time Number of receiving orders Number of packing orders Number of store deliveries Number of line items

Tax Shield Education Pvt. Ltd.

Cost Accounting-

Benefits and weakness of ABC ABC is more expensive than the traditional system. So a cost-benefit analysis is desirable. The benefits of ABC are many. 1. In ABC managers focus attention on activities rather than products because activities in various departments may be combined and costs of similar activities ascertained e.g. quality control, handling of materials, repairs to machines, etc. Because costs are identified with activities and then allocated to products or services, based on appropriate cost drivers, more accurate product/service costs result. Managers manage activities and not products. Change in activities lead to changes in costs. Therefore, if the activities are managed well, costs will fall and resulting products will be more competitive. To manage activities better and to make wiser economic decisions, managers need to identify the relationships of causes (activities) and e ffects (costs) in a more detailed and accurate manner. ABC focuses on this aspect. ABC highlights problem areas that deserve managements attention and more detailed analysis. The ABC systems are useful in setting priorities for managerial attention and action.

2.

3.

4.

5.

ABC is not free from certain weakness, as argued by the critics. They are mentioned below: 1. ABC fails to encourage managers to think about changing work processes to make business more competitive. ABC does not conform to generally accepted accounting principles in some areas. For example, ABC encourages allocation of such non-product costs as research and development to products while committed product costs such as factory depreciation and not allocated to products. In the USA, most companies have accordingly used ABC for internal analysis and continued using the traditional costing for external reporting. Using ABC for short-run decisions may sometimes prove costly in the long run. Consider, for example, the decision about lowering sales order handling costs by eliminating small orders that generate lower margins. While this strategy reduces the number of sales orders (the driver), customers may want frequent delivery at small lots at infrequent intervals. In a competitive en vironment (when other companies may be willing to meet the customers needs); long term profits may suffer due to elimination of small orders. ABC does not encourage the identification and removal of constraints creating delays and excesses. An overemphasis on cost reduction without regard to the constraints does not create an environment for learning about the problems and their management.

2.

3.

4.

Tax Shield Education Pvt. Ltd.

Cost Accounting-

Activity Based Management (ABM) In focus on the management of activities as the route to improving value to the customers. ABM involves activity analysis and performance measurement. Activity Based Costing serves as the major source of information in ABM. The process focuses on improvement of business by re-engineering the way the business is conducted and by continuously improving the effectiveness of the organisation. The activities can almost be seen as the building blocks of the process. Certain constraints, such as shortage of funds or capacity, may exist which limits the firms potential of profi t-earning capabilities. ABM also evaluates these constraints in order to overcome, as far as possible, the constraints and to maximise the return to the shareholders. Activity Based Budgeting is used as one of the tools in ABM.

Activity Based Budgeting (ABB) Brimson and John define activity-based budgeting as the process of planning and controlling the expected activities for the organisation to derive a cost -effective budget that meets forecast workload and agreed strategic goals. An activity -based budget is a quantitative expression of the expected activities of the firm, reflecting managements forecast of workload and financial and non-financial requirements to meet agreed strategic goals and planned changes to improve performance. Thus, the key eleme nts of ABB are: type of work/activity to be performed; quantity of work/activity to be performed; and cost of work/activity to be performed.

ABB focuses on the activity/business processes. Resources required are determined on the expected activities and workload. The objective is to bring in efficiency into the system. So, in the process of budget preparation, many key questions, need to be addressed and properly answered Problems : 1. Units produced Materials moves per product unit Direct labour hours per unit Budgeted material handling costs Rs. 1,74,000 Required: (a) Determine cost per unit of the products using the volume -based allocation method (direct labour hour rate) (b) Determine cost per unit of the products using ABC, and (c) Comment on the results. 2. The particulars relating to two products are given below. Product A is a new undeveloped product with production and quality problems r equiring many engineering changes. Product B is, however, a mature product and does not, therefore, require much engineering attention. Product A 20 6 870 Product B 20 14 870

Tax Shield Education Pvt. Ltd.

Cost Accounting-

Product A Units produced Engineering change notices per product line Unit cost per engineering change notice Machine hours per unit Material handling cost per unit Required: 200 20 Rs. 2,500 4 Rs. 2,610

Product B 200 6 Rs. 2,500 6 Rs. 4,090

(a) Compute overhead cost per unit of each product using the traditional machine hour rate method; (b) Compute overhead cost per unit of each product using ABC.

3.

Family Supermarkets (FS) has decided to increase the size of its Memphis store it wants information about the profitability of individual products lines : Soft drinks, fresh produce, and packages food. FS provides the following data for the year 2003 for each product line. Soft drinks Fresh Product $ 840,240 600,000 0 336 876 2,160 441,600 Packages Food $ 483,960 360,000 0 144 264 1,080 122,400

Revenues Costs of goods sold Cost of bottles order placed Number of purchases order placed Number of deliveries received Hours of shelf-stocking time Items sold

$ 317,400 240,000 4,800 144 120 216 50,400

FS also provides the following information for the year 2003 : Activity (1) 1. Description Activity (2) Bottles orders & returns bottles to stores Total CostCost s Allocation Base (3) $ (4) 4,800 Direct tracing to soft drink line 624 purchase orders 1,260 deliveriesmerchandise 3,456 hours of stocking time 614,400 items sold

2. 3. 4.

OrderingPlacing of orders for purchases DeliveryPhysical delivery and receipt of Shelf-Stocking of merchandise on store stocking shelves and ongoing restocking

62,400 100,000 69,120

5.

CustomerAssistance provided to customers,122,880 support including check out and bagging

Tax Shield Education Pvt. Ltd.

Cost Accounting-

Required 1. Family Supermarkets currently allocates store support costs (all cost other than cost of goods sold) top product lines on the basis of cost of goods sold of each product line. Calculate the operating income as a percentage of revenues for each product line. If FS allocates store support costs (all costs other costs of goods sold) to product line using an ABC system, calculate the operating income and operating income as a percentage of revenues of each product line.

2.

4.

The following information provides details of the costs, volume and transaction cost drivers for 2003 in respect of Multi-products Ltd.

Product X Production & sales (units) Raw materials consumption (units) Direct material cost (Rs.) Direct labour hours Machine hours Direct labour cost (Rs.) Number of production runs Number of deliveries Number of receipts Number of production orders Overhead cost: Set-up Machines Receiving Packing Engineering 30,000 5 25 11/3 11/3 8 3 9 15 15 Rs. 30,000 7,60,000 4,35,000 2,50,000 3,73,000 1,848,000

Product Y 20,000 5 20 2 1 12 7 3 35 10

Product Z 8,000 11 11 1 2 6 20 20 220 25

Total

Rs. 1,238,000 88,000 76,000

30 32 270 50

Required: (a) Determine the manufacturing cost per unit of each product using: (1) a single-volume (direct labour hours) based allocation method of overhead costs; (2) two-volume (machine hours and material handling) based allocation methods of overhead costs; (3) activity based costing. (b) Present a summary of the product costs for each of the three approaches and briefly state the reasons for differences in costs.

Tax Shield Education Pvt. Ltd.

Cost Accounting-

5.

A manufacturing company produces a variety of products, some of which are selling at a high volume while others are selling at a low volume because of being at different stages in their life cycles. You are given the following data for the year ended 31.3.2004: Factory overhead costs: Materials related : Materials handling Materials receipts and processing Freight-in Rs. Rs.

43,600 54,400 24,000

1,22,000

Machine related: Machine operating cost Machine set up cost Other overhead Total overhead Direct materials cost Direct labour hours Quantity of materials (kg.) Set-up hours Number of receipts Machine hours

1,00,800 32,040

1,32,840 3,60,000 6,14,840 2,03,400

80,000 30,000 84 1,600 7,200

The company used volume-based cost drivers and allocated all materials related overhead based on direct materials cost, all machine related overhead based on machine hours and all remaining overhead based on direct labour hours. The company, however, wants to switch over to ABC system for more accurate ascertainment of overhead costs. Required: (a) Determine the three overhead rates currently used by the company. (b) List the cost driver that you would like to use to allocate each cost pool to products using ABC. (c) Determine the overhead rates that the ABC system should use for the year ended 31.3.2004 based on the new cost drivers. During the last twenty years, KLs manufacturing operation has become increasingly automated, with computer-controlled robots replacing operatives. KL currently manufactures over 100 products of varying levels of design complexity. A single, plant-wide overhead absorption rate (OAR), based on direct labour hours, is used to absorbed overhead costs. In the quarter ended March 20X4 , KLs manufacturing overhead costs were : Rs.(000) 125 25 85 35 40

6.

Equipment operation expenses Equipment maintenance expenses Wages paid to technicians Wages paid to store men Wages paid to dispatch staff

310

Tax Shield Education Pvt. Ltd.

Cost Accounting-

During the quarter, Rapier Management Consultants were engaged to conduct a review of KLs cost accounting systems. Rapiers report includes the following statement : In KLs circumstances, absorbing overhead cost in individual products on a labour-hour absorption basis is meaningless. Overhead costs should be attributed to products using an activity-based costs (ABC) system. We have identified the following as being the most significant activities :

1. 2. 3. 4.

receiving component consignment from suppliers ; setting up equipment for production runs ; quality inspections; Dispatching goods orders to customers.

Equipment operation and maintenance expenses are apportionable as follows : components stores (15 per cent), manufacturing (70 per cent ) and goods dispatch (15 per cent.) Technician wages are apportionable as follows : equipment maintenance (30 per cent,) setting up equipment for production runs (40 per cent) and quality inspections (30 per cent). During the quarter : a total of 2,000 direct labour hours were worked (paid at Rs.12 per hours ); 980 component consignment were received from suppliers; 1,020 production runs were set up; 640 quality inspection were carried out; and 420 goods orders dispatched to customers. KLs production during the quarter included components r, s, and t. The following information is available. Component r Component s Component t Direct labour hours worked 25 480 50 Direct materials costs Rs.1,200 2,900 1,800 Component consignment received 42 24 28 Production runs 16 18 12 Quality inspections 10 8 18 Goods orders dispatched 22 85 46 Quantity produced 560 12,800 2,400 Requirements (a) Calculate the unit cost of components r, s and t, using KLs existing cost accounting system (single-factory, labour-hour ). (b) Explain how an ABC system would be developed using the information given. Calculate the unit cost of components r, s and t, using this ABC system. 7. ABC Ltd produces a large number of products including A and B. A is a complex product of which 1,000 are made and sold in each period. B is a simple product of which 25,000 are made and sold in each period. A requires on direct labour hour to produce and B requires 0.6 direct labour hours to produce. ABC Ltd. employs twelve salaried support staff a direct labour force that works 400,000 direct labour hours per period. Overhead costs are Rs.5,00,000 per period. The support staff are engaged in three activities six staff engaged in receiving 25,000 consignments of components per period, three staff engaged in receiving 10,000 consignment s

Tax Shield Education Pvt. Ltd.

Cost Accounting-

of raw materials per period and the staff engaged in disbursing kit of components and materials for 5,000 production runs per period. Product A requires 200 component consignments, 50 raw material consignments and ten production runs per period. Product B requires 100 component consignments, eight raw material consignments and five production runs per period. Requirements (a) Calculate the overhead cost of A and B using a traditional system of overhead absorption based on direct labour hours; (b) Identify appropriate cost driver and calculate the overhead cost of A and B using an activitybased costing system ; (c) Compare your answer to (a) and (b) and explain which gives he most meaningful impression of product costs.

8.

Been Products Ltd manufactures two types of beanbags Standard and Deluxe. Both beanbags are produce on the same equipment and use similar processes. The following budgeted data has been obtained for the year ended 31st December 20X1.

Product Production quantity Number of purchase order Number of set-ups Resources required per unit Direct materials () Direct labour (hours) Machine time (hours)

Standard 25,000 400 150 25 10 5

Deluxe 2,500 200 100 62.5 10 5

Budgeted production overheads for the year has been analysed as follows : Rs. Volume related overheads 275,000 Purchases relates overhead 300,000 Set-up relates overheads 525,000 The budgeted wage rate is Rs.20.00 per hours. The companys present system s to absorb overheads by product units using rates per labour hour. However, the company is considering implementing a system of activity-based costing. An activity-based investigation revealed that the cost drivers for the overhead costs are as follows : Volume relates overheads : Purchase relates overheads : Set-up relates overheads : Requirements : (a) Calculate the unit costs for each type of beanbag using : (i) the current absorption costing method (ii) the proposed activity based costing approach. (b) Compare your results in (i) and (ii) above and briefly comment on your findings. Machine hours Number of purchases orders Number of set-ups

Tax Shield Education Pvt. Ltd.

Cost Accounting-

9.

Garden Wizard Ltd. manufactures a variety of garden tools for many markets including one items, the EC Trimmer, a hedge trimmer, that is only sold through Garden Centres and DIY chain shops. Currently three large DIY chains (X, Y, and Z) and several smaller garden centres purchases this items. Garden Wizard sells this hedge trimmer at Rs.40 per unit and the standard product cost is Rs.20 per unit. Assume 40 per cent of the standard product cost represent fixed overheads, Delivery costs vary according to the distance traveled and costs Rs.5 per kilometre. In addition when a customers stock are very low, Garden Wizard makes the occasional emergency delivery which is outside its normal delivery schedule. These cost Rs.500 per delivery. Each customer also negotiates discounts on sales prices. Order taking costs are Rs.200 per order. Publicity costs are specific to each customer as all publicity occurs in the shops and garden centres. Data relating to each of the customer are as follows : X Sales in units Kilometers travelled Number of emergency deliveries made Number of orders taken Discounts* Sales commission* Publicity costs (Rs.) 10,000 1,000 0 5 20% 10% 27,000 Y 5,000 500 0 3 15% 10% 39,000 Z 3,000 1,200 2 7 20% 10% 45,000 Other Garden Centres 6,000 7,500 0 10 6% 10% 57,000

* Discount and sales commission are calculated as a percentage of the sales value. Another DIY Chain A is currently negotiating to purchase the EC Trimmer. A is proposing to place three orders of 1,000 units each. The number of Kilometers to be travelled is estimated as 600 and A does not intend making any requests for emergency deliveries. A expects a discount of 15 per cent and the publicity costs relating to customer A will be Rs.12,000 ` Requirements . (a) Comment on the profitability of each of Garden Wizard Ltd. existing customers and what action it should take. Your response should be supported with suitable financial calculations. What factors should garden Wizard Ltd. consider before deciding to drop a customer ?

(b)

10.

ABC electronic makes audio player model AB 100. It has 80 components. ABC sells 10,000 units each month at Rs. 3,000 per unit. The cost of manufacturing is Rs. 2,00 per unit or Rs. 200 lakhs per month for the production of 10,000 units. Monthly manufacturing costs incurred are as follows : (Rs. lakhs) Direct materials costs 100.00 Direct manufacturing labour costs 20.00 Machining cost 20.00 Testing costs 25.00 Rework costs 15.00 Ordering costs 0.20 Engineering costs 19.80 200.00

Tax Shield Education Pvt. Ltd.

Cost Accounting- 10

Labour is paid on piece rate basis. Therefore, ABC considers direct manufacturing labour cost as variable cost. The following additional information is available for AB 100 (i) (ii) (iii) Testing and inspection time per unit is 2 hours. 10 per cent of AB 100 manufactured are reworked. It currently takes 1 hours to manufacture each unit of AB 100.

ABC places two orders per month for each component. Each component is supplied by a different supplier. ABC has identified activity cost pools and cost drivers for each activity. The cost per unit of the cost driver for each activity cost pool is as follows.

Manufacturing Activity 1. Machine costs 2. Testing costs

Description activity Machining components

of Cost driver

Cost per unit of Cost driver hours of Rs. 200 Rs. 125

Machine capacity

3. Rework costs

4. Ordering costs 5.Engineering costs

Testing components Testing hours and finished products. (Each unit of AB 100 is tested individually). Rs. 1,500 per unit Units of AB 100 Correcting and reworked fixing error and Rs. 125 per order defects Number of orders Rs.1,980per Ordering of Engineering hours engineering hours. components

Designing and managing of costs described above vary with chosen cost drivers. Over a long-run horizon, each of the overhead products and processes In response to competitive pressure ABC must reduce the price of its product to Rs. 2,600 and to reduce th Cost reduction on the existing model is almost impossible. Therefore, ABC has decided to replace AB 100 by a new model AB 200. Which is a modified version of AB 100. The expected effect of design modifications are as follows : (i) (ii) (iii) (iv) (v) (vi) (vii) The number of components will be reduced to 50. Direct materials costs to e lower by Rs. 200 per unit. Direct manufacturing labour costs to be lower by Rs. 20 per unit. Machining time required to be lower by 20 per cent. Testing time required to be lower by 20 per cent. Rework to decline to 5 per cent. Machine capacity and engineering hours capacity to remain the same.

ABC currently out sources the rework on defective units. Required (i) Compare the manufacturing cost per unit of AB 100 and AB 200. (ii) Determine the immediate effect of design changes and pricing decision on the operating income of ABC. Ignore income tax. Assume that the costs per unit of each cost driver for AB 100 continues to apply to AB 200. May 02 6b

Tax Shield Education Pvt. Ltd.

Cost Accounting- 11

11.

Apollo plc manufactures and sells several products, two of which are Alpha and Beta. Estimated data For the two products for the forthcoming period is as follows: Product data Production/sales units Alpha 5,000 Rs.000 Total direct material cost Total direct labour cost 80 40 Beta 10,000 Rs.000 300 100 other Products 40,000 Rs.000 2,020 660

Variable overhead cost is Rs.15,00,000 of which 40 percent is related to the acquisition, storage and use of direct materials and the remainder is related to the control and use of direct labour. It is current practice for Apollo plc to absorb the two types of variable overhead cost to products using an overall company-wide percentage based on either direct material cost and direct labour cost as appropriate. Apollo are considering the use of activity-based costing. The cost drivers for material and labour related overheads have been identified as follows: Alpha Beta Product Direct material related Overheads-cost driver is Weight of material Weight of material/unit Direct labour related Overheads-cost drivers is Number of labour operations Labour operations/unit other

4 6

1 1

1.5 2

Market investigation indicates that markets prices for Alpha and Beta of 75 and 95 per unit Respectively will achieve the estimated sales shown in (i) above. Apollo plc require a minimum estimated contribution: sales ration of 40 percent before proceeding with the production or sale of any product. Requirements (a)Prepare estimated unit product costs for Alpha and beta where the variable overhead is charged to product units as follows: Using the existing absorption rates as detailed above, Using an activity-based costing approach. (b)Using the information in (a) prepare an analysis that will help Apollo determine whether both A and B should remain in production.
12.

Trimake Ltd makes three main products, using broadly the same production methods and equipment for each. A conventional product costing system is used at present, although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Hours per unit Labour Machine Hours hours 0.5 1.5 1.5 1 1 3 Material per unit Rs. 20 12 25 Volume units 750 1,250 7,000

Product x Product Y Product Z

Tax Shield Education Pvt. Ltd.

Cost Accounting- 12

Direct labour costs Rs.6 per hour and production overheads are absorbed on a machine hour basis. The rate for the period is Rs.28 per machine hour. Requirements (a) Calculated the cost per unit for each product using conventional methods Further analysis shows that the total of production over heads can be divided as follows: % 35 20 15 30 _________ 100

Costs relating to set-up Costs relating to machinery Costs relating to material handling Costs relating to inspection Total production overhead

The following total activity volumes are associated with the product line for the period as a whole: Number of Set-ups Product X Product Y Product Z Movements of materials Number of inspections

75 12 150 115 21 180 480 87 670 670 120 1,000 (b) Calculate the cost per unit for each product using ABC principles.

13.

Having attended a CIMA course on activity-based costing (ABC) you decide to experiment by applying the principles to the four products currently made and sold by your company. Details of the four products and relevant information are given below for one period: Product Output in units Costs per unit ( Rs.) Direct material Direct labour Machine hours (per unit) A 120 40 28 4 B 100 50 21 3 C 80 30 14 2 D 120 60 21 3

The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overhead is currently absorbed by using a machine hour rate,
and the total of the production over head has been analysed as follows: Machine department costs(rent, Business, rates, depreciation & Supervision) Set-up costs Stores receiving Inspection/quality control Material handling and dispatch Rs. 10,430 5,250 3,600 2,100 4,620

You have ascertained that the cost drivers to be used are as listed below for the overhead costs : Set-up costs Number of production runs Stores receiving Requisitions raised Inspection/quality control Number of production runs Materials handling and dispatch Orders executed

Tax Shield Education Pvt. Ltd.

Cost Accounting- 13

The number of requisitions raised on the stores was 20 for each product and the number of orders executed was 42, each order being for a batch of 10 of a product. Requirements (a) Calculate the total costs for each product if all overhead costs are absorbed on a machine hour basis. (b) Calculate the total cost of each product, using activity-based costing. (c) Calculate and list the unit product costs from your fingers in (a) and (b) above, to show the differences and comment briefly on any conclusions which may be drawn which could have pricing and profit implications.

14.

D has recently set up a small business, which manufactures three different types of chair to customer order. Each type is produced in a single batch per week and dispatched as individual items. The size of the batch is determined by the weekly customer orders. The comfort, the Relaxer and the Scandinavia. The comfort is a fully leather-upholstered chair and is the most expensive of the range. The Relaxer is the middle-of the-range chair, and has a comfortable leather seat. The cheapest of the range, the Scandinavia, is purely a wooden chair, but D feels it has great potential and hopes it will provide at least 50 per cent of sales revenue. D has employed F, an experienced but unqualified accountant, to act as the organisations accountant. F has produced figures for the past month, April 20X2, which considered a normal month in terms of costs: Profit statement for April 20X2 Rs. Sales revenue Material costs Labour costs Overheads Profit Comfort 30 Rs. 395 85 120 150 355 40 17,250 27,600 34,500 Rs. 79,800

79,350 450 Scandinavia 150 Rs. 225 50 80 100 230 (5)

Unit produced & sold during April Selling price per chair Less: Costs per chair: Material Labour Overheads absorbed on labour Hours Profit per chair

Relaxer 120 Rs. 285 60 100 125 285 --

D hopes to use these figures as the basis for budgets for the next three months. He is pleased to see that the organisation has made its first monthly profit, however small it might be. On the other hand, he is unhappy with Fs advice about the loss-making Scandinavia, which is, either to reduce its production or to increase its price. D is concerned because this advice goes against the strategy on which he based his business idea. After much discussion F says that he has heard about a newer type of costing system, known as activity-based costing (ABC), and that he will recalculated the position on this basis. In order to do this, F extracts the following information: Comfort Relaxer Scandinavia Wood (metres) per chair 10 9 9 Leather (metres) per chair 4 2 Labour (hour) per chair 24 20 16

Tax Shield Education Pvt. Ltd.

Cost Accounting- 14

The overheads included in Aprils profit statement comprised: Rs. Set-up costs 5,600 Purchasing and checking leather hides 4,000 Purchase of wood 2,400 Quality inspection of leather seating 3,200 Dispatch and transport 6,000 Administration and personnel costs 13,300 Requirements (a) Use the ABC technique to prepare a revised product cost statement for April 20X2 such as F might produce. (b) Explain whether the statement you have prepared provides an adequate basis to make decisions on the future production volume and price of the Scandinavia. What other information or approach might you seek or adopt?