Casino Guichard Abc Bourse

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Aandeel: Casino Guichard (Parijs lokaal), ISIN: FR Koers 25.28 Hoogste koers 46.32 Laagste koers 19.33 1-jrs rend. Bienvenue sur le site du Groupe Casino. Since 17 March 2020, Casino Group’s 220,000 employees in France, Brazil, Colombia, Uruguay, Argentina and the Indian Ocean have rallied to continue supplying our 11,172 stores and serving millions of customers every day.

Definition of Activity Based Costing

What is Activity Based Costing? How does Activity Based Costing work?

Activity-based costing (ABC) is an accounting process that enables Casino Guichard to assign overhead activities costs of the firm to the specific products and services it produces & delivers.
Compare to the traditional process, ABC assigns the overheads and indirect costs less arbitrarily and focuses on true relationship between costs, overhead activities, and related products (manufactured, produced) / services delivered by Casino Guichard.

Solving Casino Guichard Costing Problem with ABC Accounting Method

Casino Guichard markets two types of products in the Retail (Grocery) industry. For sake of simplicity let us call them Services Standard product and Services Custom Product. Standard Product is lot simpler than Custom Product, so Casino Guichard produces Standard product in large batch sizes compare to Custom product which is produced in smaller batch sizes.

Casino Guichard Standard Product	Casino Guichard Custom Product
Annual Sales (Units)	12153	12353
Sales Price (Per Unit)	64 USD	83 USD
Batch Size (units)	1000	50
Direct Labor Time / per unit	2	2.5
Direct Labour rate per hour	8	8
Direct Input cost per unit	22	32
Number of Custom Parts per unit	1	4
Number of Set-Ups per batch	1	3
Separate Material per batch	1	1
Number of Sales Invoices - issued per year	50	240

Overhead Cost Analysis	USD	Cost Drivers
Set Up Costs	72347	Number of Set Ups
Special part handling cost	60547	Number of Special Parts
Customer invoicing cost	28626	Number of Invoices
Material handling cost	62466	Number of Batches
Other overheads	107521	Labor Hours

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Solution Based on Traditional Approach of Costing

Traditional Approach - Absorption Approach
The difference between the traditional method and ABC can be only noticed when there are different types of products produced by Casino Guichard and indirect costs comprise a significant chunk of the overall cost structure of Casino Guichard.
One of the key reasons why small firms still use traditional method is its sheer simplicity. ABC can be highly complex if the firm is present in number of industries and, produce & market various products around firm's core competency.
How direct costs are treated in ABC? Is it different from the way it is treated under traditional approach?
The answer is no difference at all. ABC is concerned only with the way in which overheads are charged to jobs to derive the full cost.

Step 1 - Calculating Overhead Recovery Rate of Indirect Costs

Overhead Cost Analysis	USD
Set Up Costs	72347
Special part handling cost	60547
Customer invoicing cost	28626
Material handling cost	62466
Other overheads	107521
Total Overheads (1+2+3+4+5)	331507

To calculate the 'Overhead Recovery Rate' add up all the indirect costs that Casino Guichard is incurrring for both the standard and custom product.

Overhead Recovery Rate Formula

Overhead Recovery Rate = Total Overheads / Number of Labor Hours

Overhead Recovery Rate = 6.01 Per Hour

Step 2 - Product / Service Costs - Adding Direct and Indirect Costs

Standard Product	Custom Product
Direct Costs
Labor Hrs * Labor/hr	16	20
Material	22	32
Indirect Costs
Overheads (recovery rate * hours)	12.02	15.025
Total Costs Per Unit (1+2+3)	50.02	67.025

Using the Overhead Recovery Rate Calculation we can assign the indirect cost to individual products. We are just allocating the variable or indirect costs based on the hours taken by labor to produce the standard and custom products.
Total cost per unit under the traditional method can be calculated by adding up - Raw material costs, labor costs, and indirect cost allocation using Overhead Recovery Rate formula.

The Total Cost per unit of Standard product is 50.02
The Total Cost per unit of Custom product is 67.025

Return on Sales Calculations for Casino Guichard

Return on Sales metrics enables the firm to allocate resources where it can maximize returns. After subtracting the cost per unit of the product from sales price of the product we can arrive at the profit per unit.

Standard Product	Custom Product
USD per Unit	USD per Unit
Selling Price	64	83
Total Cost	50.02	67.025
Profit	13.98	15.975
Return on Sales	21.84	19.247

The profit per unit of custom product is higher than standard product.In isolation these numbers don't provide a great insight as price is often the function of competitive forces in the market place. To explore further we should analyze - Return on Sales per unit.

Activity Based Costing System for Casino Guichard

Activity Based Costing can improve the costing process at Casino Guichard in three prominent ways –
By increasing the number of cost pools – ABC help in identifying the activities that are being performed by organization’s resources. Often too narrow allocation can result in unclear understanding of both activities and how resources spent on them.
By assigning costs to various activities that are segmented based on the role they perform in overall processes. Instead of treating all indirect costs as one organization wide pool, ABC pools the costs based on each activity.
Finally assigning costs to respective products, service and customers activities in the organization using activity cost drivers.

How to calculate Activity Based Costing & What is the formula for Activity Based Costing?

After identifying all the support activities and associated costs & factors that drive those cost, managers at Casino Guichard can take following steps to conduct ABC costing -
Step 1- Establishing Cost Pool for each activity based on the Retail (Grocery) dynamics.
Step 2 - Allocating total cost associated with each activity to the relevant pool.
Step 3- Calculating Per Unit Cost based on the relevant cost driver.
Step 4 Final Step - Dividing the amount in each pool by estimated total usage of the cost driver. Then the unit cost is multiplied by the number of units of the cost driver of that specific product.
You can easily follow the above four steps in the following table of ABC Calculations.

ABC Calculations

Overhead Cost	Driver	(a) Standard Diver Volume	(b) Custom Diver Volume	(c) Total Diver Volume a+b	(d) Costs USD	(e) Driver Rate (d/c)	(f) Standard Total Cost a*e	(g) Custom Total Cost b*e	Standard Unit Costs	Custom Unit Costs
Set Up Costs	Set-up per Batch	12	720	732	72347	98.834699453552	1186.0163934426	71160.983606557	0.097590421578427	5.7606236223231
Special part handling cost	Special Parts per unit	12153	49412	61565	60547	0.98346463087793	11952.04565906	48594.95434094	0.98346463087793	3.9338585235117
Customer invoicing cost	Invoices per year	50	240	290	28626	98.710344827586	4935.5172413793	23690.482758621	0.40611513547102	1.9177918528795
Material handling cost	Number of Batches	12.153	247.06	259.213	62466	240.98328401739	2928.6698506634	59537.330149337	0.24098328401739	4.8196656803478
Other overheads	Labor Hours	24306	30882.5	55188.5	107521	1.9482500883336	47354.166647037	60166.833352963	3.8965001766672	4.8706252208341

Per Unit Overhead Cost using ABC

There are two steps to calculate per unit overhead costs using ABC method. First calculate per unit cost based on cost driver usage by specific product and then add those overhead costs for the product to arrive at Per Unit Overhead Cost of a product

Overhead Unit Cost	Standard	Custom
Set Up Costs	0.097590421578427	5.7606236223231
Special part handling cost	0.98346463087793	3.9338585235117
Customer invoicing cost	0.41	1.92
Material handling cost	0.24098328401739	4.8196656803478
Other overheads	3.8965001766672	4.8706252208341
Total Overheads	5.62	21.3

The total overheads of standard unit using ABC costing is 5.62 and the overheads of custom unit uning ABC costing method is 21.3

Total Cost Using ABC Technique

The total cost per unit of standard and custom product can be calculated by adding up - direct cost, raw material cost, and ABC derived per unit indirect cost.

Standard Product	Custom Product
Direct Costs
Labor Hours * Cost of Labor per Hours	16	20
Material	22	32
Indirect Costs
ABC- Overhead	5.62	21.3
Total Costs Per Unit (1+2+3)	43.62	73.3

The Total Cost per unit of Standard product is 43.62
The Total Cost per unit of Custom product is 73.3

If we compare the total costs using traditional method and ABC method, we can easily observe that the difference between the total cost of custom product to that of standard product is far higher under ABC method than it is under the tradtional method.

Return on Sales Using ABC Costing Analysis

Standard Product	Custom Product
USD per Unit	USD per Unit
Selling Price	64	83
Total Cost	43.62	73.3
Profit	20.38	9.7
Return on Sales	31.84	11.684

The profit per unit of standard product is higher than custom product under ABC technique.By comparing the Return on Sales numbers under both traditional and ABC technique - We can easily conclude that ABC is far more effective costing technique for Casino Guichard as it stops inefficient allocation of costs to Standard product. Casino Guichard should focus on standard product rather than custom product as standard product is delivering much higher returns on sales.

Limitations of ABC Costing Method

ABC is time consuming and costly.
Setup costs and updating cost for example in the automobile industry is very high and ABC fails to inculcate it.
Business with similar product and services output that require similar activities then the benefits from ABC are very limited.