Hi all
We currently run Finance and distribution modules on BAAN 4c4. We do have manufacturing implemented. We would like to implement ABC Costing. Does anyone have similar experience/ documentation . Please let us share. Any potential pitfalls things to watch for are welcome.


regards
Tapiwa

Sorry I meant to say we do not have manufacturing implemented

ACTIVITY BASED COSTING

In the Activity Based Costing the allocations are calculated on the basis of activities, which are defined as the Sixth dimension. First a list of activities must be generated, after which you can specify the surcharges for cost absorption, in connection with the selected activities.

When activity based costing is used, activities must be defined as dimensions and linked to cost drivers in the Master Data. Activities can then be used in the allocation procedure for allocating costs between dimensions. As a result, a bill of activities can be generated in which the consumption rate of activities can be printed by cost object.

When cost allocations are processed based on Activity Based Costing, the cost object results can be calculated as a surcharge and posted to the Cost Accounting (CPR) or Project Control (PCS) module in BaaN IV Manufacturing. This allows the user to update the cost price calculation for indirect costs.

Sessions to be maintained:

Maintain Cost Allocation Codes (tfcal0101m000): Define a Cost allocation code activates the Dimensions, which you want to allocate costs. And also activate the 6th Dimension Activity Based Allocations.

Maintain Cost Drivers (tfcal0102m000): Define a Cost Driver Code and link it with the Relation Field, which allows the import of quantities from other modules. The quantities for each cost driver are the basis for cost allocation by means of ACB. The quantities are also used for allocation between dimensions.



The Relation Fields are pre defined.





A cost object is presented as a dimension type. Items, Item groups or projects can be regarded as cost objects. In this session you must indicate which dimension corresponds to which item, item group or project. To a dimension only one item, item group or project can be linked. The entry of this data is mandatory if you make use of Activity Based Costing and if you want to enter allocation results as surcharge in the module “Cost Accounting (CPR)”.

The aim of this process is to calculate a surcharge for indirect costs by item group or item (anonymous items) or by project (customized items), expressed in an amount. This surcharge is part of the cost price and is aggregated to absorb the indirect costs.

Maintain Cost Categories: This allows you to link ledger accounts to the cost categories defined, which are used for the cost allocation.

Activities: are used for the allocation of cost amounts, quantities or percentages to a cost object. These activities are carried out for cost objects and can be selected if amounts must be allocated from an activity to a cost object linked to a project or item (group) with the aid of cost drivers.

Allocation Sources: are the places from which amounts are allocated for a specified dimension type and dimension. You can also allocate costs from one dimension type to another and from a cost category to dimensions.


In the above BaaN Session Maintain Allocation Sources (tfcal1101m000) in the First priority (5): we have selected the Cost Object & Dimension Code in which the amounts have been imported and seen in the session Maintain Unallocated Amounts. In the same line we are allocating the amounts to the target 6th Dimension (ACB). By selecting the First Record and zoom in to the sub session Maintain Allocation Targets (tfcal1102s000) these amounts to be allocated to the (ACB) i.e.6th Dimension code.


After that select the 2nd Record and zoom to the another sub session Maintain allocation targets (tfcal1102s000). In this session the quantities will come automatically while you import the Quantities in the session Import Quantities (tfcal1201m000). In the Maintain Allocation Sources session you are allocating the Quantities (Source) to the Target Dimension type by selecting Allocation type (Variable Quantity) and linking the Cost Driver.

In the Maintain allocation Targets (tfcal1102s000) the target dimension codes will be defined.



Generate Bill of Activities: If you process you will get the consumption Rate. The consumption Rate in this case is:

For Dimension Code 1404 is 03/81 = 0.037037
For Dimension Code 2206 is 65/81 = 0.802469
For Dimension Code 2208 is 13/81 = 0.160494

After Running the session Process Cost Allocation you will get the values:

For Dimension Code 1404: 50000*0.037037 = 01,852.00
For Dimension Code 2206: 50000*0.802469 = 40,123.00
For Dimension Code 2208: 50000*0.160494 = 08,025.00

Total: 50,000.00 (The amount we have allocated

to the ACB Dimension Code)


Maintain Surcharge Base Quantities: The surcharge base indicates how to calculate the surcharge over an allocation from an activity to a cost object.

For Dimension Codes 1404,2206 & 2208 with the Cost Driver the total Quantity for that is 1000,20000 & 4000 respectively.

After defining the Quantities in the above session run the session Post Surcharges. Then you will get the Surcharges for the different Dimension Codes with the combination of Cost Price Component you have defined in the session Maintain Activities.


These surcharges will appear in the sessions Maintain Surcharges by Item/Item group.

Regards,
Srinivas.CH
9810428975

Hi
Thank you very much for the detailed reply. I am already testing the setup in our test company. Any other ideas are still welcome.


Regards
Tapiwa

Hi all

Could someone kindly tell me how is the activity based costing is best applied in what situation in manufacturing. Thank you.

Regards
Indrabrata