{"id":101046,"date":"2021-01-08T15:29:31","date_gmt":"2021-01-08T09:59:31","guid":{"rendered":"https:\/\/www.vskills.in\/certification\/tutorial\/?page_id=101046"},"modified":"2024-04-12T14:25:53","modified_gmt":"2024-04-12T08:55:53","slug":"activity-based-costing-for-multi-principals","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/","title":{"rendered":"Activity based Costing for Multi-Principals"},"content":{"rendered":"\n<p>Warehouse space allocation, use, load aggregation, as well as transport optimization to name but a few. From a financial point of view, it is imperative to proportion aggregated cost to principals in order to understand and maintain profitability per principal. Traditional cost accounting systems usually fail to provide such a split for reasons, such as,<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Ignoring true cost of servicing different customers<\/li><li>Cost is captured at too high a level of aggregation<\/li><li>Full cost allocation still reigns supreme<\/li><li>They are functional in their orientation rather than output oriented<\/li><li>Companies understand product costs but not customer costs \u2013 yet products don&#8217;t make profits, customers do<\/li><\/ul>\n\n\n\n<p>ABC is an effective means of deriving costs per principal. It requires a mind-shift from the accounting perspective, since accountants are used to direct and indirect cost allocations. While direct costs can be easily allocated, the remaining indirect cost allocation is largely subjective and, as a consequence, presents invalid results.<\/p>\n\n\n\n<p><strong>Example:<\/strong> For the period of six months, total warehousing and transport costs amounted to R9m. During that time three principals were served with the following pallet movements: see table 11.1 below.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><td>&nbsp;<\/td><td><strong>Principal 1<\/strong><\/td><td><strong>Principal 2<\/strong><\/td><td><strong>Principal 3<\/strong><\/td><td><strong>Totals<\/strong><\/td><\/tr><\/thead><tbody><tr><td><strong>Pallets in\/out<\/strong><\/td><td>4400<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><strong>Contracted Charge per pallet<\/strong><\/td><td>R850.00<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><strong>Profit<\/strong><\/td><td>R3,740,000.00<\/td><td>R2,660,000.00<\/td><td>R2,925,000.00<\/td><td>R9,325,000.00<\/td><\/tr><tr><td><strong>ABC Cost split<\/strong><\/td><td>R3,800,000.00<\/td><td>R2,200,000.00<\/td><td>R3,000,000.00<\/td><td>R9,000,000.00<\/td><\/tr><tr><td><strong>Actual cost per pallet<\/strong><\/td><td>R863.64<\/td><td>R578.95<\/td><td>R666.67<\/td><td>&nbsp;<\/td><\/tr><tr><td><strong>Profit ()<br>\/Loss(-)<\/strong><\/td><td>-R60,000.00<\/td><td>R460,000.00<\/td><td>-R75,000.00<\/td><td>&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Despite the business making profit, Principal 2 was the only contributor to profit. Servicing Principals 1 and 3 is done at a loss. One of the benefits of ABC is that it provides a basis to renegotiate contracts where profitability is crucial.<\/p>\n\n\n\n<p><strong>The Methodology<\/strong><\/p>\n\n\n\n<p>ABC methodology consists of two steps. The first one deconstructs General Ledger cost items into agreed activities using \u201ctrace criteria\u201d. For example, wages could be allocated to activities such as administration, picking and loading using headcount as the \u201ctrace criterion\u201d. The next step is to allocate activity cost to the principals using \u201ccost drivers\u201d. For example, picking could be proportioned to principals using pallets as the \u201ccost driver\u201d. Dealing with mixed principal loads (i.e. volume &amp; weight based) specialised algorithms are required that consider factors such as customer stem distances, route distances, off-loading times, volume and weight of each load. Algorithms based on \u201ccentre of gravity\u201d type theory render inaccurate results.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Warehouse space allocation, use, load aggregation, as well as transport optimization to name but a few. From a financial point of view, it is imperative to proportion aggregated cost to principals in order to understand and maintain profitability per principal. Traditional cost accounting systems usually fail to provide such a split for reasons, such as,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-101046","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Activity based Costing for Multi-Principals - Tutorial<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Activity based Costing for Multi-Principals - Tutorial\" \/>\n<meta property=\"og:description\" content=\"Warehouse space allocation, use, load aggregation, as well as transport optimization to name but a few. From a financial point of view, it is imperative to proportion aggregated cost to principals in order to understand and maintain profitability per principal. Traditional cost accounting systems usually fail to provide such a split for reasons, such as,...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/\" \/>\n<meta property=\"og:site_name\" content=\"Tutorial\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/vskills.in\/\" \/>\n<meta property=\"article:modified_time\" content=\"2024-04-12T08:55:53+00:00\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/\",\"url\":\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/\",\"name\":\"Activity based Costing for Multi-Principals - Tutorial\",\"isPartOf\":{\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/#website\"},\"datePublished\":\"2021-01-08T09:59:31+00:00\",\"dateModified\":\"2024-04-12T08:55:53+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.vskills.in\/certification\/tutorial\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Activity based Costing for Multi-Principals\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/#website\",\"url\":\"https:\/\/www.vskills.in\/certification\/tutorial\/\",\"name\":\"Tutorial\",\"description\":\"Vskills - A initiative in elearning and certification\",\"publisher\":{\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.vskills.in\/certification\/tutorial\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/#organization\",\"name\":\"Vskills\",\"url\":\"https:\/\/www.vskills.in\/certification\/tutorial\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2017\/07\/vskills-min-logo.jpg\",\"contentUrl\":\"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2017\/07\/vskills-min-logo.jpg\",\"width\":73,\"height\":55,\"caption\":\"Vskills\"},\"image\":{\"@id\":\"https:\/\/www.vskills.in\/certification\/tutorial\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/vskills.in\/\",\"https:\/\/x.com\/vskills_in\",\"https:\/\/www.linkedin.com\/company-beta\/1371554\/\",\"https:\/\/www.youtube.com\/channel\/UCMWnscxPwRF_PqXo9B7q_Tw\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Activity based Costing for Multi-Principals - Tutorial","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/","og_locale":"en_US","og_type":"article","og_title":"Activity based Costing for Multi-Principals - Tutorial","og_description":"Warehouse space allocation, use, load aggregation, as well as transport optimization to name but a few. From a financial point of view, it is imperative to proportion aggregated cost to principals in order to understand and maintain profitability per principal. Traditional cost accounting systems usually fail to provide such a split for reasons, such as,...","og_url":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/","og_site_name":"Tutorial","article_publisher":"https:\/\/www.facebook.com\/vskills.in\/","article_modified_time":"2024-04-12T08:55:53+00:00","twitter_misc":{"Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/","url":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/","name":"Activity based Costing for Multi-Principals - Tutorial","isPartOf":{"@id":"https:\/\/www.vskills.in\/certification\/tutorial\/#website"},"datePublished":"2021-01-08T09:59:31+00:00","dateModified":"2024-04-12T08:55:53+00:00","breadcrumb":{"@id":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.vskills.in\/certification\/tutorial\/activity-based-costing-for-multi-principals\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.vskills.in\/certification\/tutorial\/"},{"@type":"ListItem","position":2,"name":"Activity based Costing for Multi-Principals"}]},{"@type":"WebSite","@id":"https:\/\/www.vskills.in\/certification\/tutorial\/#website","url":"https:\/\/www.vskills.in\/certification\/tutorial\/","name":"Tutorial","description":"Vskills - A initiative in elearning and certification","publisher":{"@id":"https:\/\/www.vskills.in\/certification\/tutorial\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.vskills.in\/certification\/tutorial\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.vskills.in\/certification\/tutorial\/#organization","name":"Vskills","url":"https:\/\/www.vskills.in\/certification\/tutorial\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.vskills.in\/certification\/tutorial\/#\/schema\/logo\/image\/","url":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2017\/07\/vskills-min-logo.jpg","contentUrl":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-content\/uploads\/2017\/07\/vskills-min-logo.jpg","width":73,"height":55,"caption":"Vskills"},"image":{"@id":"https:\/\/www.vskills.in\/certification\/tutorial\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/vskills.in\/","https:\/\/x.com\/vskills_in","https:\/\/www.linkedin.com\/company-beta\/1371554\/","https:\/\/www.youtube.com\/channel\/UCMWnscxPwRF_PqXo9B7q_Tw"]}]}},"_links":{"self":[{"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/pages\/101046","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/comments?post=101046"}],"version-history":[{"count":1,"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/pages\/101046\/revisions"}],"predecessor-version":[{"id":101047,"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/pages\/101046\/revisions\/101047"}],"wp:attachment":[{"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/media?parent=101046"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/categories?post=101046"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vskills.in\/certification\/tutorial\/wp-json\/wp\/v2\/tags?post=101046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}