Implementing Absorption, Activity Based & Life Cycle Costing in Service & Manufacturing Organisations
Costing products and services is the most crucial activity of an organisation. How an organisation cost its products/services impacts its pricing, market demand, and overall profitability. Absorption costing includes all organisational costs while costing products/services so that the price never goes below cost. Activity based costing, similarly, includes all the costs in providing a product/service to customers. However, its main benefits lie in controlling costs. Customer and product life cycle costing, on the other hand, consider market demand and identify product cost over its life cycle so that expected profit can be achieved even by pricing products less than the cost in initial periods.
This course will enable the participants to identify the distinct features and utilities of all these costing systems and implement these systems in their organisations costing and pricing activities.
(1) Understand Absorption Costing and Implement the system in real life product/service costing;
(2) Understand Activity Based Costing and Implement the system for creating cost control mechanism;
(3) Implement Product life cycle costing for managing demand and profitability over product life cycle;
(4) Implement Customer Life Cycle Costing for prioritizing customers and establishing prices over life cycle.
Workshop topics to be covered:
9:30 AM – 10:30 AM
þ Cost Behaviour Analysis – Fixed, Variable, Semi-Variable, Stepped-Fixed Costs, Mixed Costs etc.
þ Cost Unit, Cost Centre and Cost Driver
þ Introduction to Absorption, ABC and Life Cycle Costing
þ Introduction to Pricing and its relationship with Demand
10:45 AM – 12:00 PM
þ Understanding Overheads and need for Apportionment
þ Apportionment Basis – Labour Hour, Machine Hour, Volume of Production etc
þ Costing products/services using Absorption Costing
þ Dealing with under and over-absorption
12:00 PM – 1:00 PM + 2:00 PM – 3:00 PM
þ Scope and Process of Activity Based Costing
þ Costing products/services using Activity Method and comparing it with Absorption Costing
þ Controlling costs based on Activity Costing reports
þ Using Activity Costing in Activity Based Management (ABC to ABM)
3:00 PM – 4:00 PM
þ Understanding and Implement Product Life Cycle Costing
þ Gaining market share and achieving target profit using Product Life Cycle Costing
þ Understanding and Implementing Customer Life Cycle
þ Gaining new customers and achieving target profit over customer life cycle
4:10 PM – 5:30 PM
þ Case Study: Solving a complex costing issue and developing costing models using Microsoft Excel 2007.
þ Model Assessment for becoming a Caprilas Certified Costing & Pricing Expert (CCPE)
þ Identify scope of further improvement and Conclusion