Blueprint Problem 11: Activity Based System Identifying, Describing, and Assigning Costs to Activities Identifying activities is the first step in building an activity-based costing system. Activities represent action taken or work performed by equipment or people. A simple list of activities identified is called an activity inventory Activities are identified through interviews, questionnaires, surveys, and observation. Activity attributes are financial and nonfinancial information items that describe individual activities. An activity dictionary lists the activities in an organization along with desired attributes. Activity attributes are financal and nonfinancial information that describe individual activities. Examples of attributes indude types of drivers, types of cost object, value content, and quality connection. Attributes are used as a means to daosily activities. For example, activibes can be classified as primary or secondary. Type of cost object is the attribute that distinguishes the two categories of activities. A primary activity is one that is consumed by final cost objects while a secondary activity is consumed by intermediate cost objects Once activities are identified and described, then how much each activity costs must be determined. Activities consume resources and cost objects (such as products) consume activities. Types of resources consumed indude labor, material, energy, and capital. The cost of an activity is simply the cost of the resources consumed by each activity. The cost of resources is assigned to activities using direct tracing and driver tracing, Resource drivers are used to assign shared resources Resource drivers are factors that measure the consumption of resources by activities. After this initial assignment, the cost of secondary activities is assigned to neimary activities To help assign labor resources to activities, a work distribution matrix is often used. For each activity, a work distribution matrix identifies the amount of energy consumed The assignment of resource costs to activities requires that the the general ledger be unbundled and reassigned Apply the Concepts A pediatric ward in a metropoltan hospital has the following information: Resources Cost of Resources Activities Nursing hours Supervision $80,000 Supervising nurses 2,000 Supplies and uniforms 40,000 Treating patients 5,000 Salaries 500,000 Providing hygienic care 4,000 Computer 15,000 Responding to requests 6,000 Monitor 30,000 Monitoring patients 3,000 Total $665,000 20,000 Monitors are used only for the monitoring activity The one computer is used 1,200 hours for supervisory work and 800 hours for monitoring work . The nursing resources (supplies, uniforms, and labor) are assigned to activities using nursing hours. The nursing supervisor spends 100 percent of her time on supervision. Required: 1. Fill in the following table that represents the work distribution matrix for the pediatric ward (if an amount is zero, enter "0"); Percentage of Time on Each Activity Activity Supervisor Nurses Supervising nurses 100 % 0 % Treating patient %% 25 % Providing hygienic care % 20 % Responding to requests 30 % Monitoring patients % 15 96 2. Select all resources where driver tracing is used to assign costs activities: Print Item 3. Calculate the cost of each activity: Activities Cost Supervising nurses Treating patients Providing hygienic care Responding to requests Monitoring patients 4. Select all the activities that are secondary activities: Calculate the final cost of each activity below, assuming the cost of secondary activities is assigned to primary activities in proportion to the 5. labor content of primary activities (if an amount is zero, enter "o": round to the nearest dollar): Activities Final cost Supervising nurses treating patients Providing hygienic care Responding to requests Monitoring patients Check My Work 10 more. Check My Work uses remaining Previous a g @ a hp
