Recognition of Idle Resources in Time-Driven Activity-Based ...

JAMAR Vol. 7 · Number 2 · 2009(Clinton and Keys, 2002; Clinton and Webber,2004). Depreciation and energy are combinedinto a machinery resource pool while wagesand salaries and factory supplies are re-namedas labour and indirect materials respectively.Unlike the ABC and TDABC models, aresource pool in a RCA-based costing modelcan have fixed and variable components at thesame time (van der Merwe and Keys, 2001;Benjamin and Simon, 2003; Krumwiede andSuessmair, 2007). In Department M’s case,labour and machinery resource pools consist ofboth fixed and variable components while theindirect materials resource pool has variablecomponent only.The fixed component of the labour resourcepool represents administrative salaries forDepartment M. Both the ABC and TDABCmodels require all resource pools to establishlinks to cost objects through activities at one ofthe four-levels (facility, product, batch andunit). Under ABC classification, administrationis a facility-level activity in Department M. Incontrast, the RCA model allows for the directallocation of resource costs from a resourcepool to a cost object without identifying anactivity between the two. As such,management can eliminate unnecessaryfacility-level activities in the costing model.Under the new RCA-based costing model, thefixed labour cost ($30,000) is allocated to thethree product lines directly. Consequently,the administrative activity is removed from themodel.The variable component of the labour resourcepool is allocated to assembly and qualitycontrol activities on the basis of unit cost of theresource ($9 per hour) and levels of resourceconsumptions (number of hours) in the twoactivities. Accordingly $63,540 is allocated toassembly activity and $1,386 is allocated toquality control activity.Allocations of machinery cost and indirectmaterial cost are done in a way similar to theone under the ABC-based costing model. Themachinery resource pool consists of both fixedand variable components. However, costs ofboth components are allocated to the sameactivity, assembly. As such, the fixedmachinery cost ($102,000) merely constitutesthe minimum amount of machinery costallocated to assembly activity. Its existencedoes not change the way that machinery cost isallocated to product lines.The outcomes of the RCA cost allocationprocess are presented in Tables 17-19. Similarto the ABC-based costing model, resourcecosts are allocated to product lines under atwo-stage process. In the first stage, allresource costs except for the fixed labour costare allocated to assembly and quality controlactivities. Fixed labour cost and activity costsare then allocated to the three product linesTable 17: Allocation of Resource Costs to Activities – RCA-Based Costing ModelResource Pool Assembly Quality ControlLabour $63,540.00 $1,386.00Machinery $162,350.00Indirect Materials $7,000.00 $496.00Total $232,890.00 $1,882.00Table 18: Allocation of Fixed Labour Cost and Activity Costs to Product Lines – RCA-BasedCosting ModelActivityCost per Activity Standard Deluxe PremiumDriverFixed Labour N/A $10,000.00 $10,000.00 $10,000.00Assembly $32.99 $130,629.52 $72,571.95 $29,688.53Quality Control $12.22 $537.71 $611.04 $733.25Total $141,167.23 $83,182.99 $40,421.7851