Activity Based Costing - Profitability Analysis

Kaplan devises attention directing information. He catagorizes costs accoding to their variability at different hierarchical levels for each product The first is to subtract unit level activities, then batch related, product sustaining activities

Resource Consumption Models

This calculates the amount of unused or over used resources Cost of Resources Supplied = Cost of resources used + Cost of unused capacity For instance the cost of the purchasing department is $300,000 and it can do 15,000 PO's at $20 per PO. If this year it expects to process 13000 po's then $260,000 will be allocated. It has unused capacity of 2000 pos of $40,000. These can be split between Committed Resources (those that cannot be easilty adjusted such as machinery) and Flexible resources like casual labor