Full Oros ABC Tutorial

Tutorial
Oros ABC/M and Oros Scorecard

Software for Activity-Based Costing Applications
This tutorial and the related software are the product of SAS Institute, Inc, that has granted
permission for use in connection with the Blocher, Chen, Cokins, Lin text, Cost Management: A
Strategic Emphasis, McGraw Hill/Irwin, 2005
Oros ABC/M and

Oros Scorecard Tutorial
Copyright 19902001 ABC Technologies, Inc. All rights reserved.

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Printed in U.S.A
Oros 5.2 July 2001
Part Number ABC520TUT
Contents
Introduction ..................................................................................... 1
Scope of this tutorial ....................................................................................................................................... 1
If you are new to activitybased costing ................................................................................................... 1
If you are experienced with activitybased costing................................................................................... 1
Before beginning this tutorial ......................................................................................................................... 2
Tutorial conventions ....................................................................................................................................... 2
Fonts .......................................................................................................................................................... 2
Procedures ................................................................................................................................................. 2
Notes.......................................................................................................................................................... 2
Illustrations................................................................................................................................................ 3
Comparison of Oros Modeler and Oros Quick ............................................................................................... 3
Online Help..................................................................................................................................................... 3
Technical support............................................................................................................................................ 4
Additional training and tutorials ..................................................................................................................... 4
In the next lesson ............................................................................................................................................ 4
Introducing Activitybased Costing............................................... 5

The ABC model and CAMI standards .......................................................................................................... 5
The Cost Assignment View....................................................................................................................... 6
The Process View...................................................................................................................................... 6
Basic steps to building a model ...................................................................................................................... 7
Collecting information .................................................................................................................................... 7
Tyler Electronics company........................................................................................................................ 8
Creating a model folder .................................................................................................................................. 8
Installing the application................................................................................................................................. 9
Starting the application ................................................................................................................................... 9
Creating the new model files ........................................................................................................................ 10
Saving a model.............................................................................................................................................. 11
Automatically saving a model ...................................................................................................................... 12
The main window ......................................................................................................................................... 13
Properties and columns............................................................................................................................ 13
Summary center....................................................................................................................................... 13
Status bar ................................................................................................................................................. 13
Toolbars................................................................................................................................................... 14
Views....................................................................................................................................................... 14
Oros ABC/M and Oros Scorecard Tutorial
iii
Contents
Exiting the application .................................................................................................................................. 15

Opening an existing model ........................................................................................................................... 15
In the next lesson .......................................................................................................................................... 16
Building modules, centers, and accounts ................................... 17

Building by design ........................................................................................................................................ 17
Terminology ............................................................................................................................................ 18
Model structure ............................................................................................................................................. 18
Resource module ..................................................................................................................................... 18
Activity module....................................................................................................................................... 19
Cost Object module ................................................................................................................................. 19
Building the Resource module structure ....................................................................................................... 19
Creating a center ........................................................................................................................................... 20
Creating an account ...................................................................................................................................... 21
Building the Activity module structure......................................................................................................... 23
Creating activities.................................................................................................................................... 23
Building the Cost Object module structure................................................................................................... 24
Creating cost objects ............................................................................................................................... 24
Working with properties and columns .......................................................................................................... 25
Changing the properties of a column....................................................................................................... 26
Deleting a column ................................................................................................................................... 28
Building drivers ............................................................................. 29

Types of drivers ............................................................................................................................................ 29
Building a list of drivers for the model ......................................................................................................... 30
Creating assignment paths........................................................... 32

Selecting a default driver for assigning costs................................................................................................ 33
Creating assignment paths from resources to activities ................................................................................ 34
Adding resource accounts as source accounts ......................................................................................... 34
Specifying activities to receive resource costs ........................................................................................ 36
Creating assignment paths from activities to cost objects............................................................................. 37
Adding cost objects as destination accounts............................................................................................ 37
Specifying cost objects to receive Setting Up costs ................................................................................ 38
Changing the Setting Up source account driver ...................................................................................... 39
Specifying cost object accounts to receive Scheduling costs .................................................................. 41
Changing the Scheduling source account driver ..................................................................................... 41
Specifying cost object accounts to receive Inspecting costs.................................................................... 42
Changing the Inspecting source account driver....................................................................................... 42
Specifying the cost object account to receive Assembling costs ............................................................. 42
iv
Contents
Adding attributes and performance measures............................ 44

Types of attributes ........................................................................................................................................ 45
Text attributes.......................................................................................................................................... 45
Numeric attributes ................................................................................................................................... 46
Calculated attributes ................................................................................................................................ 48
Attribute centers............................................................................................................................................ 51
Attaching attributes....................................................................................................................................... 52
Removing attributes ...................................................................................................................................... 55
Model Periods............................................................................................................................................... 56
Creating and selecting a model period .................................................................................................... 56
Entering attribute quantities .......................................................................................................................... 58
Performance measures .................................................................................................................................. 59
Adding or removing performance measures ................................................................................................. 60
Adding bills of costs ..................................................................... 62

Using bills of costs........................................................................................................................................ 62
Internal and external bills and units .............................................................................................................. 63
Creating and attaching external and internal units and bills of costs ............................................................ 63
Entering data ................................................................................. 70

Entering resource costs ................................................................................................................................. 70
Assigning resource driver paths.................................................................................................................... 71
Entering resource driver quantities ............................................................................................................... 73
Assigning activity driver paths ..................................................................................................................... 74
Entering activity driver quantities................................................................................................................. 76
Entering output quantities ............................................................................................................................. 79
Calculating costs........................................................................... 81
Calculating costs ........................................................................................................................................... 81
Interpreting the calculation summary ........................................................................................................... 83
Calculation summary error example........................................................................................................ 83
Viewing and verifying calculation results..................................................................................................... 84
Verifying the calculation results.............................................................................................................. 85
Activitybased costing vs. traditional costing ............................ 87

Activitybased costing and traditional costing ............................................................................................. 87
ABC summary .............................................................................................................................................. 89
Contents
Developing a scorecard ................................................................ 90

Identifying scorecard elements ..................................................................................................................... 91
Defining strategies and objectives ................................................................................................................ 91
Building the Scorecard module structure...................................................................................................... 91
Adding strategies..................................................................................................................................... 91
Adding objectives.................................................................................................................................... 92
Deleting columns from the view................................................................................................................... 93
Ranking and weighting strategies and objectives ......................................................................................... 94
Displaying ranks and weights.................................................................................................................. 94
Assigning ranks and weights ................................................................................................................... 95
Assign weights and ranks using the ranking table................................................................................... 96
Measuring accomplishments......................................................................................................................... 98
Meters...................................................................................................................................................... 98
Targets..................................................................................................................................................... 99
Defining meters............................................................................................................................................. 99
Assigning meters using the Scorecard Wizard............................................................................................ 111
In the next lesson ........................................................................................................................................ 119
Analyzing a scorecard................................................................. 120

Named views .............................................................................................................................................. 120
Creating a named view for viewing scorecard performance ................................................................. 121
Changing meter measures and targets......................................................................................................... 123
Calculating scorecard performance............................................................................................................. 126
Analyzing scorecard results ........................................................................................................................ 128
General results....................................................................................................................................... 128
Detailed results ...................................................................................................................................... 128
Creating a performancebased business scorecard ..................................................................................... 129
Adjustments in Quarter 2 and beyond ................................................................................................... 129
Generating reports ...................................................................... 130

Report templates ......................................................................................................................................... 130
Creating a report ......................................................................................................................................... 130
Selecting the data ........................................................................................................................................ 132
Finishing up ................................................................................. 134

Exploring other features.............................................................................................................................. 134
What to do next........................................................................................................................................... 134
Index............................................................................................. 135
vi
Introduction
This tutorial is intended to familiarize you with costing and scorecarding using Oros Modeler or Oros
Quick.
This introduction addresses:
G
Scope of this tutorial
G
Before beginning this tutorial
G
Tutorial conventions
G
Comparison of Oros Modeler and Oros Quick
G
Online Help
G
Technical Support
G
Additional training and tutorials
Scope of this tutorial

This tutorial presents, through a series of handson practical exercises, the basic tools and tasks needed to:
G
Implement an activitybased costing (ABC) model of your company
G
Provide a performance management framework that aligns, measures, and communicates

organizational goals and strategies using a scorecard
Before beginning this tutorial, read the Release Notes. The Release Notes contain any lastminute changes
or additions to the application. You will find the Release Notes in the Start menu.
To complete the modelbuilding process, move through this tutorial from beginning to end exactly as it
is presented.
If you are new to activity

activitybased costing
If you are new to activitybased costing, you may benefit more from this tutorial by first learning more
about activitybased costing. A number of books, articles, and videotapes present excellent overviews of
this methodology. Even without this background, you will learn some basic activitybased costing concepts
by completing this tutorial.
If you are experienced with activity

activitybased costing
Even though you may know activitybased costing, work through this tutorial to become familiar with
Oros Modeler or Oros Quick the concepts, commands, and dialog boxes.
Introduction
Before beginning this tutorial

Before you begin this tutorial, you should be familiar with basic Windows operating system techniques
such as:
G
Starting and quitting applications
G
Selecting commands from dropdown menus
G
Working with windows (opening, closing, scrolling, moving, minimizing, and selecting)
G
Creating directories or folders
G
Terms such as dropdown menu, window, dialog box, list box, and text box
Tutorial conventions
This section discusses the conventions used throughout this tutorial.
Fonts
This Font
Represents
Example
Typewriter
Files, folders, and path names
Open the model named Tyler.mdl.
Bold
Menu > Command
Select File > Save Model As.
User Input
Type Tyler Electronics.
User interface elements such as

menus, dialog boxes, buttons, or list
items
Select Calculate Specific Modules.
Procedures
A procedure is a task, or lab exercise, that includes a set of numbered stepbystep instructions. Some
steps are followed by a comment or an explanation. A section with the following format convention
indicates a procedure:
Begin this tutorial
1.
Perform step one.

Explanatory comments and illustrations, explaining and displaying results of proper completion of
preceding steps, are included between steps when necessary.
2.
Perform step two.
Notes
A note indicates additional information that is relevant to the procedure you are performing. This is the
convention for indicated a note:
Note:
Text set off in this manner presents important information.
Introduction
Illustrations
Depending upon your display settings, and the number of times you perform a step or procedure, the
application windows may differ slightly from the illustrations presented in this tutorial. If you enter, then
delete, then reenter accounts, cost elements, or objectives, the ReferenceNumber may differ from the
illustration. The displayed order of accounts or objectives may differ if you close and reopen the model.
Consider the illustrations to be a guide.
Screen illustrations will usually show only the pertinent portions of the screen being discussed.
Comparison of Oros Modeler and Oros Quick

Oros Quick is a demo version of Oros Modeler. The following table lists some of the differences between
Oros Modeler and Oros Quick.
Oros Modeler
Oros Quick
Program group name is Oros
Program group name is Oros Quick
Model files use the extension AML. For example,

TYLER.AML
Model files use the extension MDL. For example,

TYLER.MDL
Allows multiple users
Allows only a single user
Provides an Administrator application for issuing

logins and rights
No Administrator application provided because the

application is single user
Includes an autosave option
Does not include an autosave option
No limit to the number of accounts that can be

added in the Resource, Activity, and Cost Object
modules
Limited to 24 accounts within the Resource,

Activity, and Cost Object models. More than 24
accounts can be created but then the model cannot
be saved
No limit to the number of objectives that can be

added in the Scorecard module
Limited to 6 objectives in the Scorecard module.

More objectives can be created but then the model
cannot be saved
Online Help
The Online Help is a comprehensive information system with full text search capabilities containing a
wealth of knowledge about the application. It includes:
G
Detailed stepbystep instructions to complete specific tasks
G
Information about new features
G
Reference material about other functionality
Introduction
Technical support
If you encounter problems that you cannot solve by reading Online Help or the Release Notes:
G
Collect as much information about the problem as you can
G
Review the pertinent sections in Online Help
G
Write down the steps you performed before the problem occurred
G
Write down any messages that appear on the screen
When you are ready to contact ABC Technologies, send email to support@abctech.com providing the
information you collected.
Note:
Because Oros Quick is a demo version of Oros Modeler, technical support for
Oros Quick is limited to installation problems only.
Additional training and tutorials

Additional training and tutorials can be found at the ABC Technologies, Inc. corporate web site,
http://www.abctech.com, and companion web site, http://www.bettermanagement.com.
BetterManagement.com offers indepth content on selected management concepts aimed at improving a
companys performance. The web site is a comprehensive source for performance management information
and resources including training and tutorial materials.
Topics covered include valuebased management, profitability analysis, strategic enterprise management,
activitybased costing/management, business intelligence, performance measurement, and the balanced
scorecard.
In the next lesson

Now you are ready to get acquainted with activitybased costing.
Introducing Activitybased Costing

Activitybased costing (ABC) is a system that maintains and processes information about the activities a
company performs. Using the application, you build one or more models to maintain ABC information.
You can keep all the information in one model or build many models (for example, one for costing each
department or each process). Every model includes a set of basic components: the resources, activities, and
cost objects.
This lesson addresses:
G
The ABC model and CAMI (Consortium for Advanced Manufacturing International) standards
G
Basic steps to building a model
G
Collecting information
G
Creating a model folder
G
Installing the application
G
Starting the application
G
Creating the new model files
G
Saving the model
G
Automatically saving the model
G
The main window
G
Exiting the application
G
Opening an existing model
The ABC model and CAMI standards

ABC assumes that activities cause expenditure of resources and that cost objects the results of activities
or products and services produced create the demand for activities.
The Consortium for Advanced Manufacturing International (CAMI) develops standards to define critical
business issues and to model effective strategies and solutions that resolve cost and resource management
issues. Oros utilizes the CAMI standard for activitybased model development.
The Cost Assignment View

An ABC system allows you to identify the activities performed, associate resources (expenditures) with
those activities, and flow the cost of activities to cost objects. Resource Drivers (typically, general ledger
entries such as payroll, utilities, or materials) drive expenditures to activities. Activity Drivers (such as the
number of part numbers or the number of setups) drive activity consumption to cost objects. This includes
information about costs of objects such as products, services, markets, distribution channels, engineering
projects, or customers.
The Process View

An ABC system allows you to expose the relationship between why work is done and the results of that
work. In ABC terms, Cost Drivers drive the reason for activities and the effort needed to engage in the
activities. Performance measures drive the achieved results of activities the efficiency, the required
completion time, and the quality of the activities performed.
Basic steps to building a model

The following list of steps summarizes the process for setting up and analyzing information for an activity
based costing system. This method is described completely in the lessons and exercises that follow.
Collect resource (expenditure), activity, and cost object (products and services) information to
build your ABC model.
Building modules, centers, and accounts

Create three modules to organize your resource, activity, and cost object accounts.
Create relevant cost accounts and organize them into centers.
Building drivers
Build a list of drivers that measures the consumption of expenses and activities.
Creating assignment paths

Create the paths used to assign cost among accounts and select the driver for each source
account.
Adding attributes and performance measures

Define and add attributes and performance measures to the appropriate accounts.
Adding bills of cost

Define and link external and internal cost units to accounts.
Entering data
Enter resource costs, driver qualities, output measures, and other data for a specific period of
time. Create a dimensional view of your model activity and cost information.
Calculating costs
Calculate costs and display the results.
Developing a scorecard
Measure and communicate company goals, strategies, and objectives.
10
Analyzing a scorecard
Analyze and monitor your company goals, strategies, and objectives
11
Generating reports
Review, validate, and analyze activitybased costs to determine company direction.
Activitybased costing projects begin with collecting information. Information concerning resources
(expenditures), activities (tasks), and cost objects (products and services produced) provides the basis for
building an ABC model. The Tyler Electronics company information is provided in this tutorial.
Tyler Electronics company

Tyler Electronics, a fictitious company looking to use activitybased information to more clearly
understand costs and profitability, and wishing to use this information as a foundation for Performance
Management, is used as the example throughout this tutorial.
Tyler Electronics compact disc (CD) products roll off the production line of various Tyler plants 24 hours a
day. The CD manufacturing plant produces a CD changer, model XM100, that accounts for 80% of the
companys production capacity. The remaining 20% of production capacity is absorbed by a CD specialty
product, model XM500. Film and video producers use the XM500 CD changer as part of an advanced
retrieval system for sound effects. These customers can order unique options as well.
Tyler calculates production support costs using a traditional process. The traditional company accounting
system collects the production support costs for all the plants into functional responsibility centers such as
Production Control, Quality Assurance, and Receiving. The system allocates production support costs to all
the plants. For instance, Tyler allocated $100,000 per quarter to the CD manufacturing plant. Tyler then
allocates production support costs to production based on direct labor dollars. In this case, the costs
allocated to the products are: $70,000 to the XM100 product, $30,000 to XM500 product.
Despite the similarities in the products, the specialty CD changer, with all its options, has higher costs. The
XM500 requires more people for production support, for performing various manufacturing functions, and
for updating and programming the corporate computerbased marketing and sales information system.
Tylers CD plant production manager insists that traditional cost management methods lead to inaccurate
costing. The manager suspects that the XM500 product and options actually consume more costs than
reported by the current system. This is indicated by downtime on the highpriced specialty machinery,
insufficient component availability, difficult and expensive testing, excess inventory, and employee
overtime. The production manager contends, therefore, that Tyler Electronics is not making as much profit
on the product as the traditional cost management system indicates.
Because of the trouble with this lowvolume specialty product, Tyler Electronics decided to use activity
based costing methods both to verify and validate their current pricing and margins and also as a basis for
strategic planning. The company hopes to improve decisionmaking by basing its decisions on more
accurate cost information.
Are Tylers current cost management system calculations correct? Significant product line or capacity
decisions will depend on the answer.
Creating a model folder

For Tyler Electronics, you will build a model called Tyler. You need to create a folder to hold the model.
Create a folder
1.
Start Windows Explorer.
2.
Create a folder named TYLER to hold the model you are about to build. For example, C:\TYLER.
Installing the application

A system administrator usually installs Oros Modeler. You can install Oros Quick.
Install Oros Modeler
Oros Modeler is typically installed and maintained by a designated Oros system administrator. See your
Oros system administrator to help get you started and to provide you with an Oros login name and
password.
Install Oros Quick
1.
Unzip the downloaded Oros Quick file.
2.
Run SETUP.EXE to start the installation.

Note:
Oros Quick does not require a login name or password.
Starting the application

Oros Modeler and Oros Quick are both started from the Start menu.
Start Oros Modeler
1.
Select Start > Programs > Oros [version #] > Oros Modeler.
You see the Oros Login dialog box.
2.
In the Name text box, replace Admin with your Oros login name as set up by you or your Oros
system administrator.
3.
Type your Password.

As you enter each character, an asterisk (*) appears in its place. If you do not have a password, leave
this empty. Not all organizations use passwords.
You will see the product splash screen appear and disappear. When the program opens, you see an
empty workspace with a menu bar and toolbar at the top, and a status bar at the bottom.
4.
Click OK.
Start Oros Quick
1.
Select Start > Programs > Oros Quick > Oros Quick.
You will see the product splash screen appear and disappear. When the program opens, you see an
empty workspace with a menu bar and toolbar at the top, and a status bar at the bottom.
Creating the new model files

The previously created TYLER folder will contain the model files you are about to build.
Create a new model
1.
Select File > New Model, or click
on the toolbar.
You see the Model Summary dialog box with the default model Title (PLUSTEMP) highlighted.
Oros Quick uses the

file extension .MDL
2.
Replace the default Title with Tyler Electronics.

The title is not the same as the model filename. The title appears in reports that you create and should
be long enough to clearly identify the model. The filename is assigned when the model is first saved.
3.
To communicate the purpose of this model to other team members, or to make a record of what you
have created, type the Description:
Assigns the production support costs to the setting up, scheduling, inspecting, and assembling
activities. Assigns the activity costs to the XM100 and XM500 products and the power supply
component.
4.
Click OK.
You see a module window with Resource [Period1] [Named View Multilevel] displayed in the title
bar.
10
Saving a model
Saving a model is the same as saving files in other Windows applications. As you work, you should save
your model whenever you have made changes or additions you would not want to lose.
Save a model
1.
Select File > Save, or click
on the toolbar.
Because you are saving the model for the first time, you see the Save Model As dialog box.
2.
Navigate to the C:\Tyler folder.
3.
In the File name text box, type TYLER.
Oros Modeler
Oros Quick
11
4.
Click Save.
The model file (Tyler.aml or Tyler.mdl) is created. Additional support files required by the
model are also created.
Note:
Only one model can reside in a folder. Do not save a model in a folder that
already contains a model unless you intend the new model to replace the
existing model. You are asked to confirm replacement of an existing model.
Automatically saving a model

To help prevent data loss, there is an autosave feature that saves a model automatically at a repeating,
preset interval. The default interval is 10 minutes. At the end of each interval, you see a dialog box asking
you to save your changes.
Note:
Autosave is not available in Oros Quick.
Change the autosave time interval
1.
Select Model > Options.

You see the Model Options dialog box.
Autosave is not available

in Oros Quick
12
2.
In the Every text box, set the number of autosave interval minutes.
Note:
3.
You can disable the autosave feature by clearing Auto Save Model.
Click OK.
The main window

The following figure illustrates the main window displaying the Resource module for the model named
Tyler.aml (or Tyler.mdl for Oros Quick). There are three other similar module windows in which
you will be working the Activity module, the Cost Object module, and the Scorecard module.
Note:
The model name does not appear in the title bar until you save the model.
Model
Name
Standard
Toolbar
Resource
Summary
Center
Resource
Module
Window
Columns display property data

Active View
Module
Status
Bar
Properties and columns

Columns in a module display properties associated with items in the model. For example, to display an
accounts reference number, the property ReferenceNumber can be added as a column. By default, the
model is initially set up to display the Name, Reference Number, and Cost properties of each center,
account, and cost element. There are many other types of properties that you can add to your views; you
will become familiar with them as you gain more experience.
Summary center
By default, each module opens with a summary center displayed. Its purpose is to roll up the costs of all
accounts in the module.
Status bar
The status bar at the bottom of the window provides information about the module: the active module, the
active view, and whether or not your model should be calculated to incorporate changes.
13
Toolbars
There are two toolbars: standard and assignment. As you pause the mouse pointer over a toolbar button,
you see a tool tip describing the button function. Some buttons are available only when their function can,
or should, be used. For example, when your model requires calculation, the Calculate button is available.
You will learn about some of the individual buttons on the toolbar as you go through this tutorial.
This icon is not available in Oros Quick
Standard toolbar
The standard toolbar is always visible and provides shortcuts to many basic model building and
maintenance functions.
Assignment toolbar
The assignment toolbar is displayed only when you create assignment paths. Assignment paths are built in
Source or Destination view. The assignment toolbar allows you to insert source accounts and to show and
clear assignment paths more on this in a later lesson.
Views
There are three views that change the way that information is displayed Multilevel, Destination, and
Source.
G
Multilevel view
G
Destination view
view and work with the contribution of costs to destination accounts from
source accounts. The current modules accounts are the destination accounts
G
Source view
view and work with the assignment of costs from module source accounts to
destination accounts
view and change the hierarchical structure in a module
When a new model is created, Multilevel view is displayed automatically. Most often, you work in
Multilevel view when you create and manipulate a module hierarchical structure. The Destination and
Source views will be discussed in more detail as you proceed.
Each view has its own basic column setup. For example, the basic columns in Multilevel view are Name,
ReferenceNumber, and Cost. This is also referred to as a named view. Other named views are
Destination view and Source view. Each named view has its own default column setup. You can also create
your own column setup and save it as a named view. See the Online Help for more information.
14
Exiting the application

1.
Select File > Exit.

If you have made changes since the model was last saved, you see a dialog box asking you to save
changes.
Oros Quick uses the
file extension .MDL
2.
Click Yes.
This closes the model and exits the application
Opening an existing model

1.
Start the application.

For directions, see Starting the application on page 9.
2.
Select File > Open Model, or click
on the toolbar.
You see the Open Model dialog box.

Oros Modeler
Oros Quick
15
3.
Navigate to the TYLER folder, and open it.
4.
Select the model file (Tyler.aml or Tyler.mdl).
5.
Click Open.
You see the Tyler Electronics model open.
In the next lesson

Next, you will build the Resource, Activity, and Cost Object modules.
16
Building modules, centers, and

accounts
Once the files have been created to contain the model data, you are ready to begin building the model.
G
Building by design
G
Model structure
G
Building the Resource module structure
G
Creating a center
G
Creating an account
G
Building the Activity module structure
G
Building the Cost Objects module structure
G
Working with properties and columns
Building by design
Before beginning to build a model, evaluate and make preliminary decisions about the design of the model.
Just as a building contractor needs a plan before beginning to build a house, a model builder needs a plan
for the structure of a model before beginning to build.
Factors that influence a models design include the:
G
Purpose of the model the operational or strategic questions the activitybased cost program is
intended to answer
G
Types of reports that will be needed
G
Data already collected and their format
G
Data needed that are not being collected
This tutorial uses a simple design and focuses on the steps for building a model. The design of the model
and the effort it takes can be simple or complex. The model builder will need to understand these factors,
and others that are unique to each modeling situation, to arrive at a design.
17
Terminology
The discipline of activitybased cost management (ABC) has a set of specialized terms Some are used in
this tutorial precisely because of their specialized meaning to the theory and practice of ABC. As these
terms are introduced, this tutorial provides brief definitions; more complete definitions can be found in the
CAMI Glossary of ActivityBased Management. A glossary is also included in Online Help.
Model structure
Information in a model is organized by structures called modules. Modules organize model information to
make it easier to manipulate and view. A basic model is built with three modules: the Resource module, the
Activity module, and the Cost Object module.
In the rest of this lesson, you will work with modules to store information about resources (expenses),
activities, and cost objects (products, services, or customers).
Each of the three modules is built individually but uses the same procedure. Each module has the same
characteristics but contains different types of information:
G
Module name
G
Summary center
G
Properties and columns
The fundamental objects used to track costs within modules are accounts. Accounts contain cost elements.
Cost elements are actual and budgeted costs for an account. The cost of an account is, therefore, the sum of
its cost elements.
Accounts can be grouped into centers. Each module has at least one center (the Module Summary center).
Note:
Oros Quick is limited to a total of 24 accounts within the Resource, Activity,

and Cost Object modules. More than 24 accounts can be created but then the
model cannot be saved.
Resource module
The Resource module contains the expenses (or costs) for the company or department being modeled
(salaries, materials, and depreciation).
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Activity module
The Activity module contains activities. Activities have centers and accounts with cost elements. Costs
may be assigned to activities from resource accounts or from other activity accounts.
Cost Object module

The Cost Object module contains cost objects (products, services, channels, customers). These cost objects
are assigned costs from resources, activities, other cost objects, or any combination of the three.
Building the Resource module structure

Start by creating a structure to hold the resource costs in the model. Most accounts in the Resource module
have at least one cost element, so it is a good idea to set the model options so cost elements are added
automatically each time you add an account.
Automatically add cost elements
1.

2.
Click the Cost Elements tab.
3.
In the Automatically Add Cost Elements in section, select Resource Module.

With this option selected, at least one cost element will be available to receive resource account
expenditures.
4.
Click OK.
19
Creating a center
Centers, represented by a folder icon
, allow grouping of related accounts. For each module, a summary
center is created by default. This topmost center in a module is called the Module Summary center. Place
any other centers and accounts within this Module Summary center so that, all costs will rollup within it.
For this lesson, you will create a center for the Manufacturing department and create an account for
Production costs in that center. The cost element is automatically added to the Production account. If you
add other Manufacturing accounts, place them in the Manufacturing center.
Create a center
1.
Select Modules > Resource Module, or click
2.
Select the Resource Module Summary center.
on the toolbar.
Resource Module Summary center
3.
Select Edit > Create Center, or click
You see a new center created with the default name Account Center1.
4.
Doubleclick the name Account Center1.
5.
Type Manufacturing.
6.
Press Enter.
Note:
When you need to modify an items name as completed above, you need to
select only the items name, not the icon representing the item (that action
selects the entire row). If you double click the items name, you see the items
row selected and a box surrounding the cell, indicating you can change the
contents of that cell.
20
Creating an account
Now you are ready to add the Production account to the Manufacturing center.
Note:
Oros Quick is limited to a total of 24 accounts within the Resource, Activity,

and Cost Object modules. More than 24 accounts can be created but then the
model cannot be saved.
Create an account
1.
Select the Manufacturing center.

Accounts and centers are added below the selected account or center. When adding an account or
center, select the account or center to which the new account or center belongs. The new account or
center is added to the top of the selected account or center list. You can reorder the accounts and
centers later by dragging them.
2.
Select Edit > Create Account, or click
on the toolbar.
You see a resource account named Account1 added to the Manufacturing center. You can tell it is a
is highlighted.
resource account because the top tier of its icon
A
symbol beside the Account1 resource account indicates that you can expand the account to a
lower level, to view its cost elements. Remember that you enabled the application to automatically add
a cost element whenever you add a new resource account.
3.
Click
to the left of the Account1, or select Account1 and click
on the toolbar.
that enables you to enter costs for the account. To see the entire
You see an entered cost element
name of the cost element, you may need to resize the Name column.
Note:
You can also create a cost element by selecting an account and clicking
the toolbar.
on
21
Resize a column
1.
Move the mouse pointer over the right edge of the Name column heading.
2.
When the pointer changes to a pair of parallel vertical lines with arrows pointing left and right, drag
the column separator to the right and then release the mouse button.
Tip:
You can also doubleclick the right column separator to resize the column
Rename an account
1.
Doubleclick Account1.
2.
Type Production.
3.
Press Enter.
4.
Doubleclick Cost Element1.
5.
Type Production Cost.
6.
Press Enter.
7.
Save the model.
22
Building the Activity module structure

An activity is a task that consumes resources. Examples of activities include setting up a machine to
produce a particular part, scheduling production of a certain number of products, or inspecting a batch of
parts. In a model, you can identify activities and calculate their costs.
Next, you will use the Activity module to store information about production support activities at the Tyler
Electronics plant. As you recall from the discussion about creating centers, the topmost center in a module
is called the Module Summary center.
Creating activities
You will open the Activity module, and then you will create four activity accounts.
Open the Activity Module
1.
Select Modules > Activity Module, or click
2.
Select the Activity Module Summary center.
Create activity accounts
1.
on the toolbar.
on the toolbar.
You see a new activity account created with the default name Activity1. You can tell it is an activity
is highlighted.
account because the middle tier of its icon
2.
Doubleclick Activity1.
3.
Type Setting Up.
4.
Press Enter.
5.
Use the procedure you just learned to create three more activity accounts named:
Scheduling
Inspecting
Assembling
6.
Save the model.
23
Building the Cost Object module structure

You have used one module to hold resource information and one to hold activity information. Products,
customers, or services that consume activities are cost objects. The Cost Object module will hold
information about the products manufactured at the Tyler Electronics CD plant: the XM100 and the
XM500, plus the power supply that goes into both. The following diagram represents the Resource,
Activity, and Cost Object modules for the Tyler Electronics model.
Usually, products are grouped into centers by categories. For this tutorial, you will simply add the products
to the Cost Object Module Summary center.
Creating cost objects

Next, you will move to the Cost Object Module and add two Tyler Electronics products: the XM100 and
the XM500 plus the Power Supply.
Open the Cost Object Module
1.
Select Modules > Cost Object Module, or click
2.
Select the Cost Object Module Summary center.
Create cost object accounts
1.
on the toolbar.
on the toolbar.
You see a new cost object account created with the default name Cost Object1. You can tell it is a cost
is highlighted.
object account because the bottom tier of its icon
2.
Doubleclick the name Cost Object1.
24
3.
Type XM100.
4.
Press Enter.
5.
Use the procedure you just learned to add two more cost objects named:
XM500
Power Supply
6.
Save the model.
Working with properties and columns

By default, a model is set up initially to display the basic properties of each center, account, and cost
element. These basic object properties are name, reference number, and cost. There are other types of
properties that you can display. In the example the follows, you will add the FullName property in a
column in the Resource module. This new column will display the full path of each of the items in the
model.
Select and display a property in a column
1.
Select Module > Resource Module or click
2.
Click the Cost column heading.
on the toolbar.
You see the entire column selected.

3.
Select View > Add Column.

You see the Add Column dialog box.
4.
Click the Property tab.
25
5.
From the Property dropdown list, select FullName.
Yield is not
available in Oros
Quick
6.
Click Add.
7.
Click Close.
You see a column named FullName added to the right of the Cost column. You may need to widen the
FullName column and the module window to see the additions.
Changing the properties of a column

You can change the type of property displayed in a column. In the following example, you will change the
FullName column to display the Level property instead.
26
Change a property
1.
Doubleclick the FullName column heading.

You see the Configure Column dialog box. This dialog box looks similar to the Add Column dialog
box. However, the Configure Column dialog box allows you to modify only the column selected,
whereas the Add Column dialog box allows you to add several columns at one time and make
modifications to the columns as they are added.
2.
Click the Property tab.
3.
From the Property dropdown list, select Level.
4.
Click Format to centeralign the text within the column.

You see the Format Column dialog box.
5.
From the Alignment section, select Center.
6.
Select Size Column to Text.
Yield is not
available in Oros
Quick
27
7.
Click OK until you return to the Resource module.

You see the FullName column replaced with the Level column and the level properties of each object
centered in the column.
Deleting a column
Delete columns when you do not need them. Delete the Level column as an example.
Delete a column
1.
Click the Level column heading.
2.
Select Edit > Delete Column, or press Delete.

You see the column removed.
3.
Save the model.
In the next lesson

After building the three basic modules, you need to add resource and activity drivers to the model. These
drivers allocate resources to activities and activities to cost objects. In the next lesson, you will learn about
drivers and create a list of drivers for the model.
28
Building drivers
An important aspect of activitybased costing (ABC) is an understanding of how activities in a company
consume expenses and how products consume activities. These consumptions are managed by drivers,
which measure the frequency or intensity of the cost demands placed on resources and activities. A driver
specifies how costs will be assigned.
G
Types of drivers
G
Building a list of drivers for the model
Types of drivers
Two types of drivers are used in this tutorial.
G
Resource driver
A measure of the frequency and intensity of the demands placed on resources by activities. A resource
driver assigns costs (expenditures) to activities.
G
Activity driver
A measure of the frequency and intensity of the demands placed on activities by cost objects. An
activity driver assigns costs to cost objects (products or services).
There are two systemdefined drivers: EVENLY ASSIGNED and PERCENTAGES.

G
EVENLY ASSIGNED
Assigns costs equally among the destination accounts from the source account.
G
PERCENTAGES
Assigns costs among destination accounts from the source account according to a percentage you
specify.
Userdefined drivers can also be created.
29
Building drivers
Building a list of drivers for the model

The first step in linking resource costs to activities and activity costs to cost objects is building a list of
drivers.
At Tyler Electronics, technicians set up the production line every time either the XM100 or the XM500
is manufactured. The frequency of performing various activities connected with setting up the production
line is measured by the number of times the production line is set up. Therefore, you will define a driver
named no. of setups for the Setting Up activity.
Schedulers receive orders from customers. To fill those orders for products, they:
G
Schedule the production capacity of the plant
G
Determine how many units of each kind must be produced
G
Group the products into manageable batches (lots)
Now, you will build a list of drivers for the model.
Define a list of drivers
1.
Select Model > Define Drivers.

You see the Define Drivers dialog box.
New Driver
button
Systemdefined
drivers
2.
Click
You see a new driver, Driver 3, displayed in the Name text box and the driver added to the Drivers list.
3.
For the Name, type no. of setups.
30
Building drivers
4.
Verify that the default value for Quantity Type is Unique.

A quantity type can be unique or shared. A unique quantity type driver is assigned to one account.
A shared quantity type driver can be assigned to two or more accounts that have the same driver
quantity.
5.
Verify that the default value for Driver Type is Basic.

A basic driver presumes that destination accounts consume source account cost or activities using only
one factor or variable; for example, the number of hours, units, and employees. Other driver types
include calculated and weighted.
6.
Click Update to save the new driver.
7.
Use the procedure you just learned to define another driver named no. of lots with a Quantity Type of
Shared.
8.
Click Close.
9.
Save the model.
In the next lesson

Now that drivers are built, costs can be linked from resources to activities and from activities to cost
objects. In the next lesson, you will build these links by assigning costs through assignment paths.
31

An assignment path links source accounts to destination accounts. Costs flow along this path from
resources to activities to cost objects from expenses to activities to products, services, or customers.
A source account is the source of a cost assignment. A destination account receives the results of a cost
assignment.
G
Selecting a default driver for assigning costs
G
Creating assignment paths from resources to activities
G
Creating assignment paths from activities to cost objects
As shown in the above diagram, the possible assignment paths, as indicated by a letter, are:
A From a Resource account to another Resource account
B From a Resource account to an Activity account
C From a Resource account to a Cost Object account
D From an Activity account to another Activity account
E From an Activity account to a Cost Object account
F From a Cost Object account to another Cost Object account
32
Selecting a default driver for assigning costs

At Tyler Electronics, the expenses (resources) will be assigned to the four activity accounts using the
systemdefined PERCENTAGES driver. The activity costs are then assigned to the products by the
systemdefined PERCENTAGES driver and the drivers you defined previously: no. of setups, no. of lots.
Before specifying the drivers for the source accounts, set a default driver. Each source account will use this
default driver as its initial driver. Using the default driver option saves time when many assignments use
the same driver. The driver can be changed on an accountbyaccount basis when necessary.
Select the default driver
1.
Select Model > Select Default Driver.

The Default Driver is currently EVENLY ASSIGNED; (Unique). This means the source account costs
are equally divided among destination accounts.
Because different Production support activities at Tyler Electronics consume different amounts of time
(resources), the cost driver is the percentage of time Production support spends on each activity.
Therefore, the PERCENTAGES driver is a better default driver.
2.
From the Default Driver dropdown list, select PERCENTAGES; (Unique).
3.
Click OK.
In a later lesson, when data is entered into the model, you will specify the percentage of resource costs to
assign to each activity account.
33
Creating assignment paths from resources to

activities
While building the model hierarchical structure, you have been working in Multilevel view. To create
assignment paths, you must change to either Destination view or Source view. In both these twopane
views, you can see source accounts, destination accounts, assignment paths, driver names, and driver
quantities. Because cost is assigned through activities across modules, you will work in the Activity
module. To assign resource costs to activity accounts, you will change to the Destination view. To assign
costs from the activity accounts to the cost object accounts, you will change to the Source view.
Create assignment paths
1.
Select Modules > Activity Module, or click
on the toolbar.
You see the Activity module brought to the front and made the active module.
2.
Select View > Destination View, or click
on the toolbar.
The following illustration shows the new company of the information. Notice that the defined activity
accounts are automatically shown on the right side of the window. These will become the destination
accounts. You might need to widen the module window and columns to see all the information.
Assignment toolbar
Source accounts
appear on this side
of the view.
3.
Slider bar
Destination accounts
If the slider bar hides any information in the left pane, drag the slider bar to the right.
Adding resource accounts

accounts as source accounts
In the left pane of the window, you will add the Production account whose costs will be assigned to all the
activities. You assign cost of accounts not cost of centers.
Add source accounts for assignments
1.
Click
on the assignment toolbar.
You see the Add Accounts for Assignments dialog box.

This dialog box allows you to display and select available source accounts for assignment of cost to
destination accounts. Because you are in the Activity module, you see information about the Resource
module centers and accounts.
34
2.
In the Module Hierarchy section, doubleclick the Manufacturing center.

You see the center expand.
3.
Select the Production account.
4.
Click Add Accounts.
5.
Click Close.
You see Production now listed as a source account in the Activity module. The top tier of the
Production source account icon
is highlighted, indicating that it is a source account from the
have the middle tier shaded;
Resource module. Icons for source accounts from the Activity module
have the bottom tier shaded.
icons for source accounts from the Cost Object module
35
Specifying
Specifying activities to receive resource costs
Next, you will create assignment paths from the Production source account to activity destination accounts.
1.
Select the Production resource account in the left pane.

You see assignment arrowheads on the slider bar.
2.
Place the mouse pointer over the arrowhead next to the Setting Up activity account.
The arrowhead turns red, indicating that an assignment to the destination account can be made.
3.
Click the assignment arrowhead pointing to the Setting Up activity account.

You see an arrow from the Production source account to the Setting Up activity destination account.
This indicates that Production costs will be assigned to the Setting Up activity.
Assignment Arrowheads
Note:
4.
The driver name is PERCENTAGES, the default driver you set previously,
although you might need to move the slider bar to see it.
Create assignment paths from the Production resource account to the remaining activity destination
accounts:
Scheduling
Inspecting
Assembling
36
Creating assignment paths from activities to

cost objects
Source view facilitates assigning costs from the activity accounts (source accounts) to the cost objects
accounts (destination accounts).
Adding cost objects as destination accounts

Adding activity accounts as source accounts uses the same procedure as adding resource accounts as source
accounts. In Source view, the Activity module hierarchy appears on the left side. The activity account costs
will be assigned to the products (cost objects). The right side of the view lists the cost object accounts (after
they are added) that receive the activity costs.
Add accounts
1.
Select View > Source View, or click
on the toolbar.
You see the Activity accounts in the left pane.
2.
Click
on the assignment toolbar.
You see the Add Accounts for Assignments dialog box.
37
3.
Drag the cursor over all the cost objects (products).

You see them selected.
4.
Click Add Accounts.
5.
Click Close.
You see the XM100, XM500, and Power Supply listed as destination accounts for the Activity
module.
Specifying cost objects to receive Setting Up costs

In the beginning half of assignment paths, you assigned resource accounts (as source accounts) to activity
accounts (as destination accounts). To complete the final half of the cost assignment paths, the activity
accounts are the source accounts and the products (cost objects) are the destination accounts.
1.
Select the Setting Up source account.

You see the assignment arrowheads on the slider bar.
38
2.
Click the assignment arrowheads pointing to the XM100 and the XM500 cost object account.
You see costs assigned from the Setting Up activity source account to both product destination
accounts.
3.
Resize the columns and drag the slider bar to view the entire DriverName column.
4.
Save the model.
Changing the Setting Up source account driver

The default driver, PERCENTAGES, is assigned to the Setting Up activity source account. You created
two new drivers in the previous lesson. The driver no. of setups was created to be the driver for the Setting
Up source account. You now must change the Setting Up activity driver to that driver.
Change drivers
1.
Doubleclick the Setting Up activity icon.

You see the Enter Driver Quantities dialog box.
Source
account
Current
driver
Destination
accounts
for source
account
costs
39
The Assignments tab lists the destination accounts to which you will assign the Setting Up activity
source account cost. The destination accounts current driver is PERCENTAGES.
2.
Click the Driver tab.
3.
From the Driver Name dropdown list, select no. of setups.
4.
Click OK.
The driver for the Setting Up activity is now no. of setups.
Note:
You can also select a driver by doubleclicking the driver name in the window
shown above.
40
Specifying cost object accounts to receive Scheduling costs

Complete the final half of the cost assignment paths from the Scheduling source account to two product
(cost object) destination accounts: XM100 and XM500.
1.
Select the Scheduling activity account.
2.
Click the assignment arrowheads pointing to the XM100 cost object account and the XM500 cost
object account.
You see costs assigned from the Scheduling activity source account to both product destination
accounts.
Changing the Scheduling source account driver

The default driver, PERCENTAGES, is assigned to the Scheduling activity source account. The no. of lots ,
which you created in a previous lesson, should be the driver for the Scheduling source account. You will
now change the Scheduling account driver to that driver.
Change drivers
1.
Doubleclick the Scheduling activity account.

2.
Click the Driver tab.
3.
From the Driver Name dropdown list, select no. of lots.
4.
Click OK.
The driver for the Scheduling activity is now no. of lots.
41
Specifying cost object accounts to receive Inspecting costs

Next, you need to create assignment paths from the Inspecting source account to the cost object accounts.
1.
Use the procedures you just learned to create assignment paths from the Inspecting source account to
the XM100 and XM500 products.
2.
Save the model.
Changing the Inspecting source account driver

Now change the driver of the Inspecting activity account.
Change drivers
Use the procedures you just learned to select the no. of lots driver for the Inspecting activity account.
Specifying
Specifying the cost object account to receive Assembling costs
Finally, complete the final half of the Assembling cost assignment path.
42
1.
Use the procedure you just learned to create an assignment path from the Assembling activity source
account to the Power Supply cost object destination account.
You see the model default driver, PERCENTAGES, assigned to the Assembling activity.
2.
Save the model.
In the next lesson

You have now completed creating a Cost Assignment View of an ABC model.
Specifically, you have built:
G
The Resource module, created the Manufacturing center that contains the Production account, and set
up the Production account cost element
G
The Activity module to include the activity accounts: Setting Up, Scheduling, Inspecting, and
Assembling
G
The Cost Object module to include the cost object accounts: XM100, XM500, and Power Supply
G
Resource and Activity drivers: no. of lots, no. of setups
G
Assignment paths to flow costs from source accounts to destination accounts
In the next lesson, you will add attributes and performance measures to your model.
43
Adding attributes and performance

measures
An attribute is a label or identification tag attached to a center, account, or entered cost element. The
attribute conveys information about the object to which it is attached.
Attributes have multiple purposes. They can be used to:
G
Group ABC data to simplify report preparation and interpretation
G
Attach numeric information to use in calculated drivers and calculated attributes
G
Link numeric information to performance measures
G
Create different dimensions of data
G
Describe how well an activity is performed, what type of activity it is, and how activity cost behaves
G
Report similar cost categories across cost centers
G
Highlight improvement opportunities
G
Classify cost components as fixed or variable, valueadded or non valueadded

G
Types of attributes
G
Attribute centers
G
Attaching attributes
G
Removing attributes
G
Model Periods
G
Entering attribute quantities
G
Performance measures
G
Adding or removing performance measures
44
Types of attributes
There are four attributes types, which are discussed more in detail later in this lesson:
G
Text
G
Numeric
G
Calculated
G
Center
Text attributes
Text attributes describe model information. These attributes enable you to categorize, select, and subtotal
information in a report. Activities may be grouped by summarylevel processes detailed manufacturing
activities roll up to manufacturing, detailed distribution activities roll up to distribution. The names of
these higherlevel processes are defined as text attributes and are attached to their respective activities. You
can then generate a report or export query that groups and totals detailed activity cost by text attribute.
Other examples of text attributes include:
G
Valueadded categories (high, medium, low) attached to activities
G
Fixed cost/variable cost attached to resources allows activity or cost object costs to be grouped by
fixed and variable cost components
G
Cost object groupings to roll up products by product family, brand, market segment, or package type or
to group customers by region, channel, or salesperson
G
Total Quality Management (TQM) categories allows activities to be identified by cost of quality
category such as prevention, appraisal, and internal or external repair
Define a text attribute in a model
1.
Select Model > Define Attributes.

You see the Define Attributes dialog box.
2.
In the Definition section, for the Name, type Manual Work.

Note:
3.
The maximum length of an attribute name is 64 characters.
From the Attribute Type dropdown list, select Text.
45
4.
Click Create.
You see that text attributes are identified by
in the Attributes list.
5.
Use the procedure you just learned to define a text attribute named Machine Assembly.
6.
Click Close.
Numeric attributes
Numeric attributes provide an opportunity to enter data not entered or otherwise generated in a model.
Typically, numeric attributes are measures or quantities of units contributing to the total cost of an activity,
such as number of cases, number of pounds, number of orders, or number of times an activity is performed.
Numeric attributes are used extensively in calculating performance measures and in an ABC scorecard. As
an example, the total cost of an activity, divided by a number of times performed numeric attribute,
provides the average cost of performing one unit of that activity cost per order or cost per inspection.
You can establish numeric attributes as performance measures for special reporting purposes, such as
tracking productivity (number of inputs or rejects, cycle time, and quality), or classifying information (level
of complexity or number of subassemblies). Establishing a target costperunit, and attaching a
performance meter to the activity, provides a scorecard against which accomplishment of company
strategies and objectives can be measured
Numeric attributes and calculated drivers
The variable data contained in numeric attributes can be used in calculated drivers to yield additional
functionality and flexibility.
Consider a driver for assigning delivery costs to customers. It may be a function of both the number of trips
(frequency) and the relative time per trip (intensity). It also may be a function of the type of product
shipped to the customer refrigerated or dry.
46
Numeric attributes for these multiple variables can be defined and attached to each customer to more
effectively model the consumption of activities based on specific customer characteristics.
Note:
Calculated drivers are not addressed in this tutorial.
Numeric attributes and calculated attributes

You can couple numeric attributes with calculated attributes. In fact, the same numeric attribute can be
used simultaneously in both a calculated driver and a calculated attribute. For example, a numeric attribute
measuring inventory returns could be used in a calculated attribute measuring return on investment (ROI)
or carrying costs and also be used as a variable in a calculated driver to assign storage costs to products.
Define a numeric attribute in a model
1.

2.
For the Name, type Rejects.
3.
Select the Attribute Type of Numeric.

You see the Measures text box is now available.
4.
For the Measure, type number rejected in inspection.
5.
Click Create.
You see that numeric attributes are identified by
6.
Select Show Measures.

You see the measure associated with the attribute in the Attributes list.
7.
Use the procedure you just learned to define two more numeric attributes with measures as follows:
Name
XM100 Set Up Time
XM500 Set Up Time
8.
Measure
number of set up minutes
number of set up minutes
Click Close.
47
Calculated attributes
Calculated attributes are used to define numeric attributes built with mathematical formulas using basic
arithmetic functions addition, subtraction, multiplication, and division. The numeric value of this type of
attribute is the calculated result of its defined formula. Any numeric properties and numeric attributes used
in the equation must also be associated with, or attached to, the object (center or account).
Formulas for calculated attributes may contain any variation of the following objects:
G
Systemdefined numeric properties, such as output quantity and cost
G
Userdefined numeric attributes
G
Userentered numeric constants, such as 3, 1.5, and so on.
Calculated attributes consist of four attribute elements: Name, Measure, Formula, and Object.
Calculated attributes relate a minimum of two attributes and their associated costs. These attributes provide
a more informative picture of an activity than the activity cost alone.
As an example, a calculated attribute relating the number of orders per fulltime equivalent (FTE) using
two numeric attributes (No. Orders Processed and FTEs, both of which have been assigned to the activity
and contain numeric values for the activity,) conveys more information than No. of Orders by itself.
Calculated attributes cannot be used as performance measures.
Define a calculated attribute in a model
1.

2.
For the Name, type Inspection Reject Rate.
3.
Select the Attribute Type of Calculated.
4.
For the Measure, type number of rejects per 10 lots.
5.
Click
beside Equation.
48
You see the Equation Editor dialog box.
6.
In the Equation text box, type ( (an opening parenthesis).
7.
From the Attributes list, select Rejects.
8.
Click Insert.
This inserts the attribute named Rejects into the equation.
9.
From the Operator list, insert *.
10. In the Equation text box, type 10) (the number 10 followed by a closing parenthesis) immediately
after *.
11. From the Operator list, insert /.
49
12. From the Numeric Properties list, insert TotalDriverQuantity.
13. Click OK.

14. Click Create.
You see that calculated attributes are identified by
50
Redefine an attribute in a model
1.
In the Define Attributes dialog box, select Show Measures.
2.
From the Attributes list, select Manual Work.
3.
Change the Name to Hand Work.
4.
Click Redefine.
You see a message asking you to confirm that you want to redefine Manual Work as Hand Work.
5.
Click OK.
Attribute centers
Attribute centers group individual text, numeric, and calculated attributes and other attribute centers.
A large model may contain many attributes. Managing attributes is easier if you group them. Related
attributes are grouped by creating an attribute center and moving the related attributes into the center.
Once attributes are assigned to an attribute center, the attribute center type cannot be changed from center
to text, numeric, or calculated, and it cannot be deleted. You can rename the center, and you can delete the
center only after first removing the contents.
Define an attribute center
1.
In the Define Attributes dialog box, select Show Measures.
2.
For the Name, type Product Assembly.
3.
Select the Attribute Type of Center.
51
4.
Click Create.
You see an attribute center named Product Assembly.
5.
Drag the attributes Hand Work and Machine Assembly to the Product Assembly center.
Note:
You see the icon change to

attributes.
6.
Doubleclick
7.
Click Close.
8.
Save the model.
. This icon indicates am attribute center contains
to expand the center and display the center attributes.
Attaching attributes
After attributes have been defined, they must be attached to centers, activities, or entered cost elements.
Each such object in a model can have any number of attributes. Once an object has an attribute attached,
any changes made to the attribute are reflected in the object. If you change a numeric attribute, however,
you must recalculate the model to reflect the change.
Attach attributes to objects
1.
If necessary, select the Activity module.
2.
Select View > Multilevel View, or click
3.
Select the Setting Up activity.
4.
Select Edit > Add Attributes.
on the toolbar.
You see the Add Attributes dialog box.
52
5.
Doubleclick the Product Assembly attribute center.

You see the attributes within the attribute center.
6.
From the Attribute Hierarchy list, select Hand Work.
7.
Click <<Add<<.
You see Hand Work move to the list on the left.
8.
Click OK.
The attribute is now attached to the Setting Up activity.
9.
Use the procedure you just learned to attach attributes to the activities that follow:
Activity
Inspecting
Inspecting
Assembling
Attribute
Inspection Reject Rate
Rejects
Machine Assembly
Add a column to indicate activities with attached attributes
1.
In the Activity module, doubleclick the blank heading on the columnheading bar.
2.
Click the Icon tab.
53
3.
Select Attributes.
Yield is not available

in Oros Quick
4.
Click Add.
5.
Click Close.
You see an attribute column added that displays an icon for activities that have attached attributes.
6.
Save the model.

Note:
It is important to save your work now. In the next lesson, you will make a
change that you do not want to keep and will revert to the previously saved
model. Do not save the model again until you are instructed to so by this
tutorial.
54
Removing attributes
There are two aspects to removing attributes:
G
Detaching an attribute from an activity the opposite of attaching an attribute
G
Deleting attributes from the model the opposite of defining an attribute
Detach an attribute from an object
1.
Select the Inspecting activity.
2.
Select Edit > Add Attributes.

You see the Add Attributes dialog box.
3.
From the list on the left, select the Rejects attribute.
4.
Click >>Remove>>.
You see the selected attribute moved to the Attribute Hierarchy list on the right.
5.
Click OK.
You see that the attribute icon column in the Activity module window still indicates an attribute for the
Inspecting activity. This is because the Inspection Reject Rate attribute is still attached to this activity.
Delete an attribute from the model
1.

2.
Expand the Product Assembly attribute center.
55
3.
Select Hand Work.

Note:
4.
You can choose more than one attribute at a time using standard operating
system multipleselection methods or dragging the mouse through a contiguous
set of attributes.
Click Delete.
You see a message advising you that all uses of the selected attribute will be deleted.
5.
Click OK.
You see the selected attribute removed.
6.
Click Close.
Note:
Do not save the model.
Let us assume you did not intend to delete this attribute. Now, you must revert to the previously saved
model version. Reverting allows you to discard all changes made to the model since it was last saved.
Revert to a previously saved model version
1.
Select File > Revert to Saved.

You see a message asking if you want to discard all changes made since the model was last saved.
2.
Click OK.
You see the model close and then the last saved version of the model open.
Note:
Remember that you will lose all work performed after the last save, so be sure to
save often in case you need to use this feature.
Model Periods
A model period is an interval of time in which activitybased costing data is maintained. A model can hold
data for different periods but only one period at a time is active. The real value of model periods is the
ability to compare the model data between different periods. For example, you can enter costs into the
model on a monthbymonth basis and examine the costs for March vs. the costs for February.
A default period named Period1 is automatically created when a model is created. This period is intended
to hold information that pertains to the entire model and model structure. Although individual period data
can be stored in Period1, it is more meaningful to store data in customary business intervals of time.
Creating and selecting a model period

Tyler Electronics analyzes production costs from quarter to quarter, so the model will be structured to
analyze quarteronquarter costs.
Create a model period
1.
Select Period > Define Periods.

You see the Define Periods dialog box.
2.
For the Name, type Quarter 1.
56
3.
Click Create.
You see the period Quarter 1 added to the Periods list.
4.
Click OK.
5.
Save the model.
You will now select Quarter 1 as the active period so that you can enter attribute quantities for this period.
Select a period
1.
Select Period > Select Period.

You see the Select Period dialog box.
2.
Select Quarter 1.
3.
Click OK.
You see the model period, which is displayed in the title bar of the module, set to Quarter 1.
57
Entering attribute quantities

You have defined attributes and assigned them to activities. Now, you need to attach quantities to the
attributes. Attribute quantities are used by numeric attributes to allocate cost to activities and to calculate
performance values.
Enter attribute quantities
1.
Select the Activity module.
2.
3.
4.
Select Period > Enter Attribute Quantities.
on the toolbar.
You see the Enter Attribute Quantities dialog box.

5.
Where the Actual column and Rejects row intersect, type 12.
6.
Where the Budget column and Rejects row intersect, type 15.
Input Quantity is not

available in Oros Quick
7.
Click OK.
8.
Save the model.
Delete attribute quantities
1.
Select Period > Delete Period Data.

You see the Delete Period Data dialog box.
58
2.
Select the following options:

Module section
Activity
Data Type section

Budget
3.
Click Delete.
4.
Select Period > Enter Attribute Quantities.
Delete Data section

Numeric Attribute Quantities
You see the Enter Attributes Quantities dialog box. Notice that the budget numeric attribute quantity
for Rejects, which you entered previously, has been deleted.
5.
Where the Budget column and Rejects row intersect, type 15.
6.
Click OK.
7.
Save the model.
Performance measures indicate results achieved from work or activities performed. They also indicate how
well a company accomplishes its strategies and objectives. These measures can be financial or non
financial and include three aspects of performance:
G
Efficiency of the activity the volume of an activity compared to the resources needed to sustain the
activity measures cost indirectly. Costperitem is a measure of efficiency.
G
Timeliness of the activity the elapsed time to perform an activity, or to produce a product or service,
are indirect measures of cost. The average elapsed time to produce a product is a measure of time.
G
Quality of the activity the percentage of errorfree or onetimeonly activities are direct measures
of quality and indirect measures of cost. The percentage of rejected items and the percentage of
reworked items are measures of quality.
59
Adding or removing performance measures

To track how well Tyler Electronics is performing, you will enter some performance measures for selected
activities.
Performance measures are labels attached to centers, activities, or cost elements. In this sense, they are like
attributes but, in addition, performance measures are a source of measures that drive the balanced
scorecard.
Add or remove performance measures
1.
2.
Select Edit > Add Performance Measures.

You see the Add Performance Measures dialog box.
3.
Click Add Performance.
4.
Click in the cell where the Performance column and Rejects row intersect.
You see a check that indicates the attribute is selected as a performance measure.

5.
Click OK.
60
6.
Click Close.
Add a column to indicate activities with performance measures
1.
Doubleclick the blank heading on the columnheading bar.

2.
Click the Icon tab.
3.
Select Performance Measures.
4.
Click Add.
5.
Click Close.
You see an icon column added that displays performance measure icons for activities that have
assigned performance measures.
6.
Save the model.
In the next lesson

The foundation of your ABC model is complete. Tyler Electronics has built a structure that permits the
company to logically and accurately assign costs to work performed and products produced. Attributes are
in place to classify activities and performance measures are defined to demonstrate the results of those
activities.
Next, it is time to enter external and internal bills of costs cost for items purchased from external sources
and incurred through internal accounts.
61
Adding bills of costs

Not all costs assigned through an activitybased costing model come from the general ledger. For example,
material cost (the cost of purchased components) often comes from a Materials Requirements Planning
(MRP) system. The bill of costs feature provides a way to add material and unit costs directly to accounts
when implementing activitybased costing.
Bill of costs information is used to calculate the cost of all the materials or components contributing to a
product or process.
Bills of costs are common to processmanufacturing activities. A bill of costs for an activity lists all the
materials added at that step in the process. By adding material costs to activities that consume them, you
can trace the cost of waste, as well as finished products, more accurately.
Bills of material exist in many discrete manufacturing environments. A bill of material can be a list of the
items that make up a product, the number of items needed for a product, and the unit cost for each item.
The application does not reconcile the number of units used in a period with the number of units produced
and remaining in inventory. However, the unit usage report lists all of the items that use each unit, and the
number used, during the period. This report can be used in conjunction with an inventory control system.
G
Using bills of costs
G
Internal and external bills and units
G
Creating and attaching external and internal units and bills of costs
Using bills of costs

Bills of costs are used to find the resources consumed by an activity and consist of external or internal
units. Bills of cost are used when:
G
Costs outside the general ledger must be introduced into a model
G
Unit costs associated with product families must be tracked
G
The cost structure of an account is incomplete in some respect
Each Cost property is defined with a list of internal and external units added to any account.
62
Internal and external bills and units

In discretemanufacturing environments, many products are components of other products. These internal
units, produced by the company, can be used in any bill of costs. Units purchased by the company, with
costs maintained outside the model, are used as external units in a bill of costs.
These internal and external units are another type of cost element in addition to entered and assigned cost
elements.
The unit cost contribution for an account is included when calculating the total account cost for a period.
Creating and attaching external and internal

units and bills of costs
Once you have the information for the external and internal units, you can add the external units to an
account as a bill of costs. First, make a list of external units available to the whole model. For example, the
required raw materials for each product. Then, select units from the list for use as a bill of costs to be
attached to an account.
Create external units
1.
Select Model > Define External Units.

You see the Define External Units dialog box.
2.
Click Create.
You see a default unit called External Unit added, followed by a reference number. The default name is
selected and ready for you to rename.
3.
Change the default name of External Unit to CD Cartridges.
4.
Type Each as the Measure.
5.
Change the Actual and Budget amounts to 3.00.
63
6.
Create four additional external units as follows:

Name
XM100 Product Label
XM500 Product Label
Power Cord
Transformer
Measure
Each
Each
Each
Each
Actual
0.30
0.30
2.25
4.30
7.
Click OK.
Attach an external bill of costs
1.
2.
3.
Select the XM100 account.
4.
Select Edit > Add Bill of Costs.
Budget
0.30
0.30
2.25
4.30
on the toolbar.
on the toolbar.
You see the Add Bill of Costs dialog box.

5.
Click Add External Units.

You see the Add External Units dialog box.
64
6.
Select XM100 Product Label, then press and hold Ctrl while selecting CD Cartridges.
You see both CD Cartridges and XM100 Product Label selected.
7.
Select Add Units.
8.
Click Close.
You see the Add Bill of Costs dialog box with the two external units in the Units list.
9.
Click OK.
10. Add another column to display the BOCCost property.
65
11. Expand the XM100 account.

You see the external bills of costs
attached to the account.
12. Use the procedure you just learned to add external bills of costs as follows:
Account
XM500
XM500
Power Supply
Power Supply
External Bill of Costs

CD Cartridges
XM500 Product Label
Power Cord
Transformer
66
Attach an internal bill of cost
1.
2.
Select Edit > Add Bill of Costs.

You see the Add Bill of Costs dialog box.
3.
Click Add Internal Units.

You see the Add Internal Units dialog box.
4.
In the Module section, select Cost Object.
5.
Select Power Supply.
6.
Select Add Units.
67
7.
Click Close.
You see the Add Bill of Costs dialog box. A letter C (for Cost Object) appears in the Mod (Module)
column. If Total is not selected, the cost is interpreted as a bill of costs unit cost. The bill of costs is
calculated as the Actual Cost multiplied by the Quantity to produce Total Cost. If Total is selected, the
Actual Cost is interpreted as the bill of costs Total Cost.
8.
Click OK.
9.
Use the procedure you just learned to attach an internal bill of costs named Power Supply to the
XM500 account.
You see the internal bills of costs attached to the accounts.
10. Add an icon column to display Bill of Costs.

You see a column added that displays bills of costs icons for cost objects that have assigned bills of
cost.
Note:
Notice that the internal bills of costs amounts are not included in the total costs.
This occurs when you calculate the model, which you will do in a later lesson.
68
11. Save the model.
In the next lesson

Costs that are attached to products, and vary according to the number of units produced, have been
established in the model.
Next, for Tyler Electronics Quarter 1, you will enter data.
69
Entering data
By building the structure of the ABC model, you have defined how costs flow from resources
(expenditures) to activities (work) to cost elements (products and services) or expenditures.
Cost information is maintained in periods. Usually, these periods are months, quarters, and years. Now you
will add costs incurred by Tyler Electronics for the period Quarter 1.
G
Entering resource costs
G
Assigning resource driver paths
G
Entering resource driver quantities
G
Assigning activity driver paths
G
Entering activity driver quantities
G
Entering output quantities
Entering resource costs

Resource costs are expenditures made by a company. Typically, these expenditures are maintained in the
companys general ledger. Up to this point, you have built the structure of the model, including some
periodspecific data. Now, you will add Resource module costs for Quarter 1 to the model.
Enter costs in the Resource module
1.
Select Modules > Resource Module, or click
2.
3.
Navigate through the resource hierarchy to the Production account.
4.
5.
Select Period > Enter Costs, or doubleclick the cost element icon
on the toolbar.
on the toolbar.
You see the Costs dialog box.

6.
Select the Period of Quarter 1.
7.
Click the Entered tab.
70
Entering data
8.
Doubleclick where the Actual column and Production Cost row intersect, and type 100,000.
9.
Click OK.
You see the costs in the Resource module.
10. Save the model.

You can enter cost directly in the Cost column of an entered cost element in a module. You cannot add
a cost directly to an account or a center.
Assigning resource driver paths

Now that the total resource cost has been set, specify the activities that receive a portion of the Production
costs, and then assign them to the resource driver.
Create resource driver assignment paths
1.
Select Module > Activity Module, or click
2.
Select View > Destination View, or click
3.
Select the Activity Module Summary (the highestlevel folder in the Activity module).
on the toolbar.
on the toolbar.
71
Entering data
4.
Click
on the Assignment toolbar.
You see the Add Accounts for Assignments dialog box and the resource accounts available for
assignment to the activity accounts.
5.
In the Module Hierarchy section, select Manufacturing.
6.
Click Add Accounts.
7.
Click Close.
8.

You see the resource driver assignment paths.
72
Entering data
Entering resource driver quantities

To complete apportioning resource cost among activities, specify the portion of the $100,000 Production
cost the resource driver uses to allocate cost to each activity.
Enter resource driver quantities
1.
Select Period > Enter Driver Quantities.

2.
Click the Assignments tab.
3.
Type 40 in the cell where the PERCENTAGES column and Setting Up row intersect.
4.
Press Enter.
5.
Use the procedure you just learned to add percentages for the following activities:
Activity
Scheduling
Inspecting
Assembling
Note:
Percentages
20
10
30
If you enter amounts that total more than 100, you will see a dialog box telling
you that the account is over assigned. You will be allowed to continue but over
assigning will cause a fatal error when you calculate the model.
73
Entering data
6.
Click OK.
You see the resource cost assignment paths and the assigned driver quantities.
Note:
7.
To enter driver quantities directly, select a resource accounts cell in the

DriverQuantity column, and type the driver quantity.
Save the model.
Assigning activity driver paths

Activity drivers relate the consumption of activities by cost objects (products and services) a company
produces. Activity drivers have assignment paths specifying the cost objects that consume a portion of an
activity.
Create activity driver assignment paths
1.
Select View > Source View, or click
2.
Select the Activity Module Summary.
3.
Click
on the toolbar.
on the Assignment toolbar.
You see the Add Accounts for Assignments dialog box and the accounts available for assignment from
the activity accounts.
74
Entering data
4.
In the Module Hierarchy section, select Cost Object.
5.
Click Add Accounts.
6.
Click Close.
7.
Select the Activity Module Summary.

You see the activity driver assignment paths.
75
Entering data
Entering activity driver quantities

To complete apportioning activities among cost objects, specify the quantity of each activity consumed by
a cost object.
Enter activity driver quantities
1.
Doubleclick the Setting Up activity account in the left pane.

2.
Select no. of setups cell column for the XM100 account.
3.
Type 14 for the quantity of setups to assign to the XM100 account.
4.
Click Apply.
5.
Use the procedure you just learned to assign a no. of setups quantity of 13 to the XM500 cost object.
76
Entering data
6.
Click Close.
You see the Setting Up activity assignment paths and the assigned driver quantities.
7.
Select the Scheduling activity account.
8.
Select the DriverQuantity cell column for the XM100 account in the right pane.
9.
Type 9 as the no. of lots driver quantity to assign to XM100, and press Enter.
10. Type 13 as the no. of lots driver quantity to assign to XM500, and press Enter.
You see the Scheduling activity assignment paths and the assigned driver quantities.
77
Entering data
11. Select the Inspecting activity account.

You see the Inspecting activity assignment paths and the assigned driver quantities. Because the no. of
lots driver is a shared driver, activities that use this driver share the same quantities. Therefore, you see
the quantities you entered for the Scheduling account.
12. Select the Assembling activity account.

13. In the DriverQuantity cell column for the Power Supply cost object and type 100 and press Enter.
You see the PERCENTAGES driver quantity assigned to the Power Supply cost object.
14. Save the model.
78
Entering data
Entering output quantities

Output quantities are amounts or units of manufactured product, services provided, or customers served by
a company.
Enter output quantities
1.
2.
3.
4.
Select Period > Enter Output Quantities.
on the toolbar.
on the toolbar.
You see the Enter Output Quantities dialog box.
5.
In the Output Quantities section, select User Entered Actual.
6.
For Output, type 1040.
7.
Click OK.
8.
Use the procedure you just learned to enter 260 as the XM500 output quantity.
9.
Add a column to display the UserOutputQty property.

You see the number of units of each product produced during Quarter 1.
79
Entering data
10. Save the model.
In the next lesson

Next, you will calculate the model and see how activitybased costing allocates and distributes costs.
80
Calculating costs
The structure of an ABC model defines drivers and costassignment paths which direct how costs flow
from resources to activities to cost elements from expenditures to work to products, services, and
customers.
Typically, costs are entered in an ABC model at the end of a companydefined period. These cost data
come from the companys general ledger accounts and from external bills of costs. Additional cost
information can come from an MRP system. Production data are also entered into a model.
G
Calculating costs
G
Interpreting the calculation summary
G
Viewing and verifying calculation results
Calculating costs
Tyler Electronics cost and production quantities were entered for the Quarter 1 period, so calculations will
be performed for Quarter 1.
Calculate costs
1.
2.
3.
Select Model > Calculate, or click
on the toolbar
on the toolbar.
on the toolbar.
You see the Calculate dialog box.

4.
In the Calculate section, select All Modules.
5.
In the Errors and Warnings section, select Show Calculation Summary.
6.
If the Period is not Quarter 1, click Select Period and doubleclick Quarter 1.
81
Calculating costs
7.
In the Data Type section, select Actual.
8.
Click Calculate.
You see a Calculate Status dialog box during the calculation and a Calculation Summary window after
the calculation finishes.
Oros Quick uses the

file extension .MDL
9.
Click
to close the Calculation Summary window.
Notice that there were no warnings or errors.
82
Calculating costs
Interpreting the calculation summary

In most cases, the calculation summary shows no warnings or errors. However, warnings or errors might
occur that are informative rather than problematic. For example, errors and warnings may highlight cost
data that was 000entered incorrectly or omitted, incorrect assignment of resources to activities or of
activities to cost objects, or modules with information yet to be entered.
Experienced activitybased costing users frequently perform a model calculation after creating accounts,
assignment paths, and driver quantities, or entering cost data, as a validation and quality assurance
technique. Calculations can be performed on particular modules using the Specific Modules options in the
Calculate Costs dialog box.
Calculation summary error example

This Calculation Summary displays an error deliberately introduced to demonstrate the information
provided in a Calculation Summary with errors.
Oros Quick uses the

file extension .MDL
A fatal calculation cycle error occurred.

Attaching the Scheduling activity as an internal Bill of Cost to the Production account in the Resource
module was an invalid association. Some of the Production account cost is assigned to the Scheduling
activity and Scheduling is assigned as a unit for Production that is in the Resource module. This creates an
endless calculation cycle that prevents the model from calculating.
To correct the error, remove the Scheduling activity as an internal bill of cost from the Production account
in the Resource module.
83
Calculating costs
Viewing and verifying calculation results

The calculation flows resource costs to activities using the resource drivers and activity costs to cost objects
using the activity drivers. After calculating costs, you will want to see the total production costs for each of
the products for Quarter1.
View cost flow
1.
Add two columns to display OutputQuantity and UnitCost.

Note:
The BOCCost and UserOutputQty columns were added in the Add Bills of Cost
lesson. If necessary, complete that lesson before continuing and add the
BOCCost and UserOutputQty columns to the Cost Object module. If you added
these columns but they are not visible, move the scroll bar completely to the left
and they should become visible.
2.
Expand of the three accounts XM100, XM500, Power Supply.
3.
Save the model.
84
Calculating costs
Verifying the calculation results

By looking at the Costs column in the Cost Object module, you can see that the XM100 product
consumed $67,257.47 of the Tyler Electronics Quarter 1 production expenses during Quarter 1 and the
XM500 product consumed $45,547.53. These totals include:
G
Amount of activity cost each product consumed owing to the activity driver quantities assigned
G
Cost of external and internal bills of costs attached to each product
Activitybased costing assigns the $100,000 of production costs to each activity according to the resource
driver assignments and quantities:
Setting Up
$40,000 (40%)
Scheduling
$20,000 (20%)
Inspecting
$10,000 (10%)
Assembling
$30,000 (30%)
The products (cost objects) consume activities, and related activity costs, according to the activity driver
assignments and quantities:
Setting Up:
Scheduling:
Inspecting:
Assembling:
XM100
14 setups
XM500
13 setups
XM100
9 lots
XM500
13 lots
XM100
9 lots
XM500
13 lots
Power Supply
100%
The external bills of costs attached to the products include:

CD Cartridge and XM100 Product Label
XM100
$3.30
CD Cartridge and XM500 Product Label
XM500
$3.30
The internal bills of costs attached to the products include:

Transformer and Power Cord
Power Supply
XM100 and XM500
$6.55
The application calculates cost as follows:

Activity
XM100
XM500
Setting Up
14 setups times $40,000
13 setups times $40,000
Scheduling
9 lots times $20,000
Inspecting
$33,013.47
$36,986.53
Production Sub Total

Bill of Cost
XM100
XM500
Assembling
1,040 units times $30,000
260 units times $30,000
Power Supply
1,040 units times $8,515
260 units times $8,515
85
Calculating costs
Power Supply Sub Total
$30,812.00
$7,703.00
CD Cartridges
1,040 units @ $3.00 each
260 units @ $3.00 each
Product Labels
1,040 units @ $0.30 each
260 units @ $0.30 each
$3,432.00
$858.00
XM100
XM500
$67,257.47
$45,547.53
XM100
XM500
$67,257.47/1,040 units
$45,547.53/260 units
Package Sub Total
Total Manufacturing Cost

Unit Cost
Total Unit Cost
$64.67
$175.18
In the next lesson

Now is an appropriate time to compare activitybased costing and traditional costing methods as these
affect Tyler Electronics business decisions.
86
Activitybased costing vs.

traditional costing
The key to the difference between ABC and traditional costing methods lies in the ABC drivers.
Activitybased costing (ABC) relates resources through activities to product cost. Resource drivers relate
how general ledger costs or expenditures are attached and apportioned to work activities. Activity drivers
relate how the products produced, services performed, and customers served consume work activities and
attached general ledger expenditures.
The flow of costs through the two drivers determines the final company business cost and ultimate
profitability.
Viewing production cost through an ABC perspective can have a dramatic effect on company business
practices.
G
Activitybased costing and traditional costing
G
ABC summary
Activitybased costing and traditional costing

The following table compares Tyler Electronics production costs from an activitybased and a traditional
costing perspective.
87
Activitybased costing vs. traditional costing
Traditional method
XM100
XM500
1,040
260
$70,000.00
$30,000.00
$67.31
$115.38
XM100
XM500
1,040
260
Activitybased costing method

Total cost including materials
$67,257.47
$45,547.53
Less materials cost

(not included in traditional method)
(10,244.00)
(2,561.00)
Total production support cost
$57,013.47
$42,986.50
Production support cost per unit:

XM100 = $57,013 / 1,040 units
XM500 = $42,986 / 260 units
$54.82
$165.33
Percent Difference (ABC vs. Traditional)
18.6%
43.3%
Output quantity
Total production support cost
(direct labor cost only)
Production support cost per unit:
XM100 = $70,000 / 1,040 units
XM500 = $30,000 / 260 units
Activitybased costing method
Output quantity
Total
$100.000.00
Total
$112,805.00
$100,000.00
Tyler Electronics traditional cost management system assigned cost based on percentage of direct labor
cost attached to production. Tyler used a direct labor pro rata share of 70% for the XM100 products and
30% for the XM500 products.
Comparing the activitybased cost assignment to the traditional cost assignment, it is apparent that the
XM100 product consumes much less production support cost whereas the XM500 product consumes
considerably more.
The ABC analysis more accurately reflects the true and relevant costs of producing the two products for the
period. Tyler Electronics can use this information to support meaningful decisions about product mix,
enhancements, pricing, and the strategic management of the company.
Before making any decisions, Tyler Electronics will enhance and complete their activitybased costing
model. If current trends continue, it appears that the Tyler traditional production support cost for the XM
100 and XM500 products will be misleading.
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Activitybased costing vs. traditional costing
ABC summary
Activitybased costing provides information that more accurately reflects incurred costs. All production
costs are assigned on the basis of consumption of activities performed then are based on actual resource
expenditures. Contrast this with traditional cost systems that assign costs on the basis of indirect, unrelated,
or arbitrary measures.
For example, product costs that accurately reflect incurred costs reduce the possibility that prices are set
incorrectly or that unprofitable products are sold aggressively.
In addition to product costing, you can use activitybased costing to:
G
Pinpoint the causes of cost
G
Determine the costs of activities and processes
G
Analyze activities or policies that cause costs
G
Examine closely all the resource costs of your company
G
Scrutinize how company expenditures are assigned to activities and products
G
Estimate the cost of new products
G
Analyze business processes
G
Calculate the cost impact of proposed process improvements
G
Analyze valueadded and non valueadded activities in processes
G
Analyze quality
In addition to providing strategic information for manufacturing enterprises, the application supports
activity analysis in service businesses and organizations, process industries, engineering projects, and many
other areas of commerce.
In the next lesson

In the next lesson, you will build a scorecard to determine whether you are measuring and communicating
your strategic goals. When these elements have been defined and implemented, and with the company
scorecard in place, company goals can be prioritized, aligned, and effectively focused into a coherent
system.
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A scorecard is a performance management tool to measure and communicate strategic goals. Organizations
use this tool to align the performance efforts of each department with goals defined for the company and to
integrate their strategic plan into the fiber of the company.
By building a scorecard, management can express corporate strategic goals as a set of measurable financial
and nonfinancial objectives. A scorecard increases the management effectiveness in accomplishing
company goals by enhancing the transition from strategic objectives to tactics to results.
A scorecard can:
G
Foster communication among employees
G
Measure successes against strategies and objectives
G
Align and focus team efforts while the opportunity to improve exists
G
Focus proper resources on the necessary activities to realize company strategies
G
Increase organizational efficiency
G
Form the basis for reviews to reduce risk
Building and using the scorecard produces a tangible reporting system for translating strategy into action.
G
Identifying scorecard elements
G
Defining strategies and objectives
G
Building the Scorecard module structure
G
Deleting columns from the view
G
Ranking and weighting strategies and objectives
G
Measuring accomplishments
G
Defining meters
G
Assigning meters using the Scorecard Wizard
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Identifying scorecard elements

To build a company scorecard, certain fundamental elements are necessary:
1.
A set of strategybased objectives expressed in measurable terms
2.
Performance data based on data being tracked by the company
3.
A reporting and analysis tool
When these elements have been defined and implemented, and with the company scorecard in place,
company goals can be prioritized, aligned, and effectively focused into a coherent system. The gap between
the company mission and the daytoday activities the company performs narrows. Worldclass
improvement and achievement using performance measures becomes the company standard.
Defining strategies and objectives

Once the company mission is established, the strategies and objectives by which the company will achieve
its mission are defined.
The Tyler Electronics mission: High performance CD products from a high performance company.
Based on this mission, Tyler has defined the following strategies:
G
Build highquality products
G
Deliver costeffective products
Building the Scorecard module structure

You begin building the Scorecard module by adding your companys strategies and the objectives to meet
those strategies.
Adding strategies
Before adding the first strategy, you must make the Scorecard module active.
Add a strategy
1.
Select Modules > Scorecard Module, or click
on the toolbar.
You see the Scorecard module open.

2.
Select Edit > Create Strategy, or click
on the toolbar.
You see a new strategy named Strategy1 added to the module.

3.
Doubleclick the name Strategy1.
4.
Type Deliver CostEffective Products.
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5.
Press Enter.
To view the entire strategy name, click and drag the right edge of the Name column.
6.
Select the Scorecard Module Summary.

Note:
Strategies and objectives are added below the selected objective or strategy.
When adding a strategy or objective, select the strategy or objective to which the
new strategy or objective belongs. The new strategy or objective is added to the
top of the selected strategy or objective list. You can reorder the strategies and
objectives later by dragging them.
7.
Use the procedure you just learned to add another strategy named Build HighQuality Products.
8.
Save the model.
Adding objectives
Having defined the company strategies, objectives must be developed to support the overall strategies.
Note:
Oros Quick is limited to six objectives in the Scorecard module. More than six
objectives can be created but then the model cannot be saved.
Tyler has defined the following objectives:

G
Control the cost to produce XM100 and XM500 CDs to no more than 95% of budget during each
operating period
G
Setting up the XM100 production run will not exceed 33 minutes
G
Setting up the XM500 production run will not exceed 56 minutes
G
Inspections will result in an average of less than 1.5 rejected CDs per 10 lots
G
The XM100 and XM500 will receive the BestinIndustry award
Now, you will create six objectives for the Tyler Electronics model.
Add an objective
1.
Select the Build HighQuality Products strategy.
2.
Select Edit > Create Objective, or click
3.
Doubleclick Objective1.
4.
Type Receive BestinIndustry award.
5.
Press Enter.
6.
Use the procedure you just learned to another objective named Inspection reject rate.
on the toolbar.
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7.
Select the Deliver CostEffective Products strategy.
8.
Click
9.
Doubleclick Objective3.
four times.
10. Type XM100 production setup time.

11. Repeat steps 9 and 10 to rename the remaining objectives as follows:
Objective
XM500 production setup time
Control XM100 CD production cost
12. Save the model.
Deleting columns from the view

When you select the Scorecard module, a default scorecard view is loaded. For now, you will delete
columns from this view. In the next lesson, you will add new columns and create a new view.
Delete a column
1.
Rightclick the column heading titled W.

You see a popup menu.
2.
Select Delete Column.
3.
Press Shift and click the remaining columns to the right to select them.
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4.
Press Delete.
You see just the Name, Score icon, and Score property columns remain.
Ranking and weighting strategies and objectives

Now that you have defined and created strategies and objectives you must be rank and weight them.
Ranking and weighting prioritizes strategies and objectives. Prioritizing strategies and objectives allows
management to:
G
Reflect strategic importance
G
Influence the relative importance of each objective
G
Compare strategic hierarchies logically
G
Focus and allocate resources to achieve company goals
Displaying ranks and weights

By default, the scorecard is set up with four descriptive rank properties and four accompanying numerical
weight properties. You view ranks and weights assigned to objectives by adding the ranking and weighting
properties to the Scorecard module as columns.
Display ranks and weights
1.
In the Scorecard module, doubleclick the blank heading on the columnheading bar.
2.
Click the Scorecard tab.
3.
From the Property dropdown list, select Ranking.
4.
Click Add.
5.
From the Property dropdown list, select Weighting.
6.
Click Add.
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7.
Click Close.
You see that the default rank, Business as usual, and a default weight are assigned to all strategies and
objectives.
Assigning ranks and weights

There are two ways to assign ranks and weights to objectives:
G
Use the ranking table
G
Enter weights directly as percentages
The ranking table

The ranking table provides a way to assign preset ranks and values to strategies and objectives. The table
contains four preset descriptions and values, which can remain as defined or can be customized.
Use the ranking table
1.

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2.

By default, Use ranking table is selected.
Note:
The Description and its associated Value (marked with an asterisk) is the default
for new strategies and objectives.
3.
Click OK.
Assign weights and ranks using the ranking table
1.
Click the Ranking column cell for the Inspection reject rate objective.
2.
Select Highest priority from the dropdown list.

You see the Weighting column value for Inspection reject rate change to 80%.
3.
Click the Ranking column cell for the Receive BestinIndustry award objective.
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4.
Select Nice to have from the dropdown list.

You see the Weighting column value for Receive BestinIndustry award change to 11.11% and the
Inspection reject rate change to 88.89%. Because you are using the ranking table, the weight values
automatically adjust according to the assigned ranking.
5.
Use the procedure you just learned to assign the following rankings to the objectives for the Deliver
CostEffective Products strategy:
Objectives
XM100 production set up time
6.
Save the model.
Assign weights directly as percentages
1.
Ranking
Special attention
Special attention
Highest priority
Highest priority

2.
Select the Scorecard tab.
3.
Clear Use ranking table.
4.
Click OK.
5.
Click the Weighting column cell for the Inspection reject rate objective.
6.
Type 85 to replace the 88.89 calculated percentage.
7.
Press Enter.
8.
Click the Weighting column entry for the Receive BestinIndustry award objective.
9.
Type 15 to replace the 11.11 calculated percentage.
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10. Press Enter.
11. Save the model.

The total weight for all strategies and objectives is always 100%. Because Tyler Electronics defined two
company strategies, a 50% weighting was assigned to each.
For the Deliver CostEffective Products strategy objectives, you assigned weights using the ranking table.
Within the Build HighQuality Products strategy, there are two objectives. You directly assigned weights
that totaled 100%. However, weights totaling less than 100% could have been assigned.
If you inadvertently enter weight percentages that results in the total weight percentage for all objectives to
exceed 100%, after you calculate the model, these percentages will adjust so that they equal 100%.
Measuring accomplishments
Strategies and objectives have been defined, created, weighted, and ranked. Next, you need to measure
whether the Tyler strategic objectives are being accomplished.
The scorecard measures accomplishment of objectives using meters, targets, and attributes. A meter
translates a measurement into a score. Then, the score is normalized across a range and comparisons are
made between the measurement and the target.
Meters
A meter compares different measures and translates the result into a score. The score is aligned with an
index scale. The scorecard uses a scale from 2 to +2 and assigns one of four symbols to each range in the
index.
The Scorecard index scale
1 to 2
0 to <1
1 to <0
2 to <1
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Types of meters
Type
Definition
Examples
Qualitative
Score is derived from an objective measure. This meter is

based on qualitative data.
Completion status
Yes/No measures
Absolute Numeric
Score is derived from a numeric property or attribute. This

meter is based on numeric data.
Number of days
Numeric score received
Calculated Numeric
Score is derived from a calculated attribute. This meter is

based on numeric data.
Number of rejects per lot
Relative Numeric
Score is derived by determining the percentage of the

objective measure to the objective target. This meter is
based on numeric data.
Percentage of revenue
Difference from target value
Targets
A target is a goal established for projected resources, activities, or cost objects. Targets are based on
strategic objectives and are used to measure performance and generate scores for relative numeric meters.
Defining meters
The accomplishments of Tyler Electronics will be evaluated using four types of meters: qualitative,
absolute numeric, calculated numeric, and relative numeric. Targets are used with relative numeric meters
only.
Defining meters
The accomplishments of Tyler Electronics will be evaluated using four types of meters: qualitative,
absolute numeric, calculated numeric, and relative numeric. Targets are used with relative numeric meters.
Create a qualitative meter
1.
Select Model > Define Meters.

You see the Define Meters dialog box.
2.
Click New Meter.
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You see the Meter Definition dialog box.
3.
In the Name text box, type Awards.
4.
Click Define Attributes.

5.
In the Name text box, type Awards.
6.
From the Attribute Type dropdown list, select Center.
7.
Click Create.
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The attribute center Awards is added to the Attributes list.
8.
In the Attributes list, select Awards so that you can add attributes to the center.
9.
In the Name text box, type Winner to replace Awards.
10. From the Attribute Type dropdown list, select Text.

11. Click Create.
The attribute Winner is added to the Awards center.
12. Use the procedure you just learned to add three more text attributes named:
Top Three
Considered
Not Considered
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13. Click Close.

14. From the Source dropdown list in the Measure section, doubleclick Awards.
You see the meter condition, measure, and score values appear in the Lookup Table section.
15. In the Lookup Table section, doubleclick the Score cell for the Winner measure.
16. Type 2 and press Enter.
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17. Use the procedure you just learned to add the scores as shown in the following illustration.
18. Click View gauge.

You see the Awards scorecard meter as a gauge.
19. Click Close.

20. Click OK.
You see the Define Meters dialog box, which now contains a new meter named Awards.
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Create an absolute numeric meter
1.
Click New Meter.

2.
In the Name text box, type XM100 Set Up Time.
3.
From the Source drop down list, doubleclick the numeric attribute XM100 Set Up Time.
4.
In the Lookup Table section, doubleclick the Measure cell for the if less than condition.
5.
Type 33 and press Enter.

The cursor moves to the Score cell for the if less than condition.
6.
Type 1.5 and press Enter.

You see the following meter definition.
7.
Click
to create a new meter condition.
The cursor moves to the Measure cell for the new else if less than condition.
8.
Type 40 and press Enter.

The cursor moves to the Score cell for the else if less than condition.
9.
Type .5 and press Enter.
10. Use the procedure you just learned to create another else if less than condition with the values:
Measure
47
Score
.5
11. Doubleclick the Score cell for the else condition.
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12. Type 1.5 and press Enter.

You see the following meter definitions.
13. Click View gauge.

You see the XM100 Set Up Time meter displayed as a gauge.
14. Click Close.

15. Click OK.
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You see the Define Meters dialog box, which contains a new meter named XM100 Set Up Time.
16. Use the procedure you just learned to create another absolute numeric meter as follows:
Name
XM500 Set Up Time
Source
XM500 Set Up Time
Create the measures and scores for the XM500 Setup Time meter as shown in the following
illustration.
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17. Click OK to close the Meter Definition dialog box.

You see the Define Meters dialog box, which contains a new meter named XM500 Set Up Time.
Create a calculated numeric meter
1.
Click New Meter.

2.
In the Name text box, type Inspection Reject Rate.
3.
From the Source dropdown list, doubleclick the numeric attribute Inspection Reject Rate.
The equal sign next to the attribute name indicates this is a calculated numeric attribute.
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4.
Create the Inspection Reject Rate calculated numeric meter measures and scores as shown in the
following illustration.
5.
Click OK.
You see the Define Meters dialog box, which contains a new meter named Inspection Reject Rate.
Create a relative numeric meter for the XM100 product
1.
Click New Meter.

2.
In the Name text box, type Cost XM100 CD Changer.
3.
From the Source dropdown list, doubleclick the numeric property UnitCost.
4.
Select Calculate as a percent of target.
5.
6.
In the Name text box, type XM100 BudgetUnitCost.
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7.
From the Attribute Type dropdown list, select Numeric.
8.
In the Measure text box, type dollars per unit.
9.
Click Create then click Close.

10. From the Target section Source dropdown list, doubleclick the numeric attribute XM100
BudgetUnitCost..
11. Create the Cost XM100 CD Changer calculated numeric meter measures and as shown in the
12. Click OK.

You see the Define Meters dialog box, which contains a new meter named Cost XM100 CD Changer.
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Create a relative numeric meter for the XM500 product
1.
Click New Meter.

2.
In the Name text box, type Cost XM500 CD Changer.
3.
From the Source dropdown list, doubleclick the numeric property UnitCost.
4.
Select Calculate as a percent of target.
5.
6.
In the Name text box, type XM500 BudgetUnitCost.
7.
From the Attribute Type dropdown list, select Numeric.
8.
In the Measure text box, type dollars per unit.
9.
Click Create then click Close.

10. From the Target section Source dropdown list, doubleclick the numeric attribute XM500
BudgetUnitCost.
11. Create the Cost XM500 CD Changer calculated numeric meter measures and as shown in the
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12. Click OK.

You see the Define Meters dialog box, which contains a new meter named Cost XM500 CD Changer.
13. Click Close.

14. Save the model.
Assigning meters using the Scorecard Wizard

Once you have established objectives and meters, you can use the Scorecard Wizard to create an
association between objectives, meters, and source accounts. With the Scorecard Wizard you can:
G
Assign attributes directly to objectives without having to make an account association
G
Create a new account as a source for an objective
G
Select an existing account as a source for an objective

Note:
You can also use the Scorecard Wizard to create a new meter; however, this
procedure is not addressed in this tutorial.
Next, you will use the Scorecard Wizard to associate existing accounts with the meters and targets you just
created.
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Assign the meter for the Inspection reject rate objective
1.
Select the Inspection reject rate objective.
2.
Select Tools > Scorecard > Scorecard Wizard.

You see the first Scorecard Wizard dialog box.
3.
Select Existing account.
4.
Click Next.
You see the second Scorecard Wizard dialog box.
5.
Click Select Account.
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You see the Select Account dialog box.
6.
7.
Click OK.
You see the Scorecard Wizard.
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8.
Click Next.
You see the next Scorecard Wizard dialog box.
.
9.
Select Inspection Reject Rate.
10. Click Next.

You see the final Scorecard Wizard dialog box.
11. Click Finish.
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12. Expand the Inspection Reject Rate objective.

You see that the Inspecting activity has been added to the objective.
Assign the meter for the Receive BestinIndustry award objective
1.
Select the Receive BestinIndustry award objective.
2.
Rightclick Tools > Scorecard > Scorecard Wizard.

Note:
In addition to selecting the Scorecard Wizard from the Tools menu, you can also
open the Scorecard Wizard by rightclicking on an object and selecting
Scorecard Wizard from the popup menu.
3.
Select Existing account.
4.
Click Next.
5.
Click Select Account.
6.
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7.
In the Cost Object list, select XM100.
8.
Click OK.
9.
Click Next.
10. Select the Awards meter from the Available meters list.
11. Click Next.
12. From the Measure dropdown list, select Winner.
13. Click Finish.
The Scorecard Wizard closes and You see the Scorecard module.
14. Expand the Receive BestinIndustry award objective.
You see that the XM100 account has been added to the objective.
15. Save the model.
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16. Select Tools > Scorecard > Scorecard Wizard.

You see the final Scorecard Wizard dialog box for the Awards measure.
Note:
Because the Receive BestinIndustry award objective is still selected, the

Scorecard Wizard returns you to the last step for its meter.
17. Click Back three times to return to the step in the Scorecard Wizard where you select the account
type.
18. Select Existing Account.

19. Click Next.
20. Use the procedure you just learned to assign the Awards meter to the XM500 cost object with the
Measure value of Winner.
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Assign the meters for the Deliver Cost Effective Products objectives
1.
Using what you learned in the previous procedure, add four more meters and cost objects to the
objectives as follows:
Objective
Note:
2.
Cost
object
XM100
XM500
XM100
XM500
Meter
Measure
XM100 Set Up Time

XM500 Set Up Time
Cost XM100 CD Changer
Cost XM500 CD Changer
33
56
<blank>
<blank>
No measure data is required for the Control XM100 CD production cost and
Control XM500 CD production cost objectives because these measures are
based on unit cost data already contained in the model.
Expand the Deliver CostEffective Products strategy.
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You see that the XM100 cost object has been added to the XM100 production setup time and
Control XM100 CD production cost objectives, and the XM500 cost object has been added to the
XM500 production setup time and Control XM500 CD production cost objectives.
3.
Save the model.
In the next lesson

Now that the meters have been created, you are ready to assign the meters to the Scorecard objectives,
calculate the module, and then analyze the results to assess whether Tyler Electronics is meeting its goals,
strategies, and objectives.
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Activitybased costing not only uses cost to analyze business processes but also uses a scorecard.
A scorecard enables a company to monitor progress toward its goals, strategies, and objectives.
G
Named views
G
Changing meter measures and targets
G
Calculating scorecard performance
G
Analyzing scorecard results
G
Creating a performancebased business scorecard
Named views
Named views allow you to quickly load and view properties you want to see. There are several named
views provided for the Scorecard module. You can also create your own named view.
Open named views
1.
Select View > Named Views, or click
on the toolbar.
You see the Named Views dialog box.
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2.
Expand the Scorecard Views.

You see a list of the views provided for the Scorecard module.
3.
Click Cancel.
Creating a named view for viewing scorecard performance

Scorecard performance can be displayed using four ABC model properties:
G
Score
G
Meter
G
MeterMeasure
G
MeterTarget
Note:
Because the Score property is already a part of the view, you will not be adding
this property.
Create a new view
1.
Doubleclick the blank heading on the columnheading bar in the Scorecard module.
2.
3.
From the Property dropdown list, select Meter.
4.
Click Add.
5.
From the Property dropdown list, select MeterTarget.
6.
Click Format.
You see the Format Column dialog box.
7.
In the Alignment section, select Right.
8.
Click OK.
9.
Click Add.
10. Use the procedure you just learned to add the column named MeterMeasure.
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11. Click Close.

You see the Meter, MeterTarget, and MeterMeasure properties added as columns in the view.
12. Expand and collapse the width of the columns as needed.

13. Save the model.
Save the new view as a named view
1.
Select View > Named Views, or click
on the toolbar.
You see the Named Views dialog box.

2.
Select Model.
Note:
3.
Click
Saving your view into the Model folder saves the view as a part of the model.
Saving to local saves the view to your local hard drive.
to create a new view.
You see a new view named Named View1 added beneath the Model folder.
4.
Type Tyler Scorecard View to replace Named View1.
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5.
Press Enter.
6.
Click OK.
You see the new view name in the Scorecard module title bar.
Changing meter measures and targets

You can change meter measure data using the Scorecard Wizard. You can also add performance measure
data for the meters.
Change meter measure data using the Scorecard Wizard
1.
If necessary, expand the Receive BestinIndustry award objective hierarchy.
2.
3.
Select Tools > Scorecard > Scorecard Wizard.

You see the final step of the Scorecard Wizard.
4.
Click Back three times to return to the step in the Scorecard Wizard where you select the account
type.
5.
Select Existing Account.
6.
Click Next three times until you reach the final step of the Scorecard Wizard.
7.
From the Measure dropdown list, select Not Considered.
8.
Click Finish.
9.
Use the procedure you just learned to change the XM500 account for the Receive BestinIndustry
award performance measure value to Top Three.
10. If necessary, expand the XM100 production setup time objective hierarchy.
11. Select the XM100 account.
12. Select Tools > Scorecard > Scorecard Wizard.
13. In the Measure text box, change the performance measure value of 33 to 31.
14. Click Finish.
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15. Use the procedure you just learned to change the XM500 account (within the XM500 production set
up time objective) performance measure value of 56 to 74.
You see the changes reflected in the MeterMeasure column.
16. Save the model.
Enter performance measure data
1.
Select the XM100 account from within the Control XM100 CD production cost objective.
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2.
Select Edit > Add Performance Measures.

You see the Add Performance Measures dialog box.
3.
Click Add Performance.
4.
Click the cell where the Performance column and XM100 BudgetUnitCost row intersect.
You see a check mark appear in the cell.
5.
Click the cell where the Actual column and XM100 BudgetUnitCost row intersect.
6.
Type 65 to replace the value of 0.00.

7.
Click OK.
8.
Click Close.
9.
Select the XM500 account from within the Control XM500 CD product cost objective.
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10. Use the procedure you just learned to select it as a performance measure and change the Actual value
of the XM500 BudgetUnitCost attribute from 0.00 to 110.
You see the changes in the MeterTarget column.
11. Save the model.
Calculating scorecard performance

Activitybased scorecard results are calculated, as are activitybased costs, on a period basis. You will now
calculate the Scorecard module for Quarter 1.
Calculate costs
1.
Select Model > Calculate, or click
on the toolbar.
You see the Calculate dialog box.

2.
Select Specific Modules.

You see the check boxes below become available.
3.
In the Calculate section, select Scorecard.
4.
In the Errors and Warnings section, select Show Calculation Summary.
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5.
If the Period is not Quarter 1, click Select Period, and doubleclick Quarter 1.
6.
In the Data Type section, select Actual.
7.
Click Calculate.
You see the Calculate Status dialog box followed by the Calculation Summary window. Notice that
there were no warnings or errors.
8.
Close the Calculation Summary window.

You see the Scorecard module has been calculated and the scores have been adjusted.
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Analyzing scorecard results

Analyzing ABC scorecard results permits a company to align resources and activities to strategies and
objectives. Tyler Electronics prioritized objectives provide an organizational road map to set company
direction. What do the Quarter 1 results indicate for the company?
General results
Because all of the scorecard meters have four associated measures, a general ExcellentGoodFair
Poor scorecard index scale can be applied to the Tyler scorecard results analysis.
The overall scorecard performance is Fair
unacceptable results are present.
. But within this module, a variety of both acceptable and
G
The product Inspection reject rate was decidedly Poor . There were 12 rejects out of 22 lots
produced (9 XM100 lots and 13 XM500 lots) yielding a rate of 5.45 rejects per 10 lots. The goal of
less than 1.5 rejects per 10 lots was not attained.
G
The Receive bestinindustry award objective performance averaged Fair

an XM500 Top
Three score of 1.0, plus an XM100 Not Considered score of 2.0; averaged .5 (1.0 / 2).
G
The Deliver Costeffective Products strategy performance, while achieving an overall rating of only
, was impaired primarily by poor performance of the Control XM500 CD production
Fair
cost objectives. The performance on the XM100 production set up time objectives was
while the XM500 CD production set up time was Fair
.
Excellent
Detailed results
The XM100 CD Changer met the XM100 production set up time objective and nearly met the
Control XM100 CD production cost objective. Although four times more XM100 CD Changers than
XM500 CDs were produced, and the activitybased cost per unit was 18.6% lower than the traditional
cost, the XM100 CD Changer apparently was not judged well by industry peers.
The XM500 CD Changer was judged among the Top Three CD Changers in the industry, but failed to
approach the XM500 production set up time objective, had an unacceptable XM500 CD production
cost, and was much more costly (43.3%) when viewed from an activitybased cost perspective than when
viewed from a traditional cost perspective.
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Creating a performancebased business

scorecard
The culmination of managing business costs through activitybased costing methods, and business results
through performancebased goals and objectives, is the company business plan. Based on the Quarter 1
results, what might be done in Quarter 2 and future periods to improve business and make it more
profitable?
Adjustments in Quarter 2 and beyond

Based on the results of the scorecard, the following outlines some adjustments that Tyler Electronics might
make in the next quarter in order to meet the strategies and objectives.
Build HighQuality Products
Inspection reject rate
G
Separate the XM100 and XM500 reject data
G
Adjust targets and track rejects by product
Receive BestinIndustry award

G
Align XM100 specifications with industry preferences and recommendations
G
Maintain XM500 features and enhance this product where possible
Build CostEffective Products

Production set up time
G
Maintain XM100 set up time and processes
G
Improve XM500 set up process where possible
Control production cost

G
Maintain XM100 production cost tolerances
G
Reduce XM500 production costs
In the next lesson

Next, you will generate reports to see the results of the model.
129
Generating reports
Once the information has been entered into the activitybased costing model, the costs calculated, and the
data reviewed, the next step in analyzing the data is generating reports. Benefits of generating reports
include:
G
Validating the model
G
Producing printouts that present an overall view of the data
G
Analyzing costs on the screen
G
Producing files for inclusion in other programs, such as spreadsheets or word processors
G
Focusing on a specific area of interest
G
Emphasizing certain data in relation to other data

G
Report templates
G
Creating a report
G
Selecting the data
Report templates
Report templates allow you to determine the type of information reported and how it is presented. There are
several report templates provided. Refer to the Online Help for a list.
Creating a report
You will create a report and view the results onscreen. The following report is for the Quarter 1 period
and includes unit costs for each type of product.
130
Generating reports
Create a report
1.
Select File > Generate Reports.

You see the Generate Reports dialog box.
2.
From the Module Reports list, select Unit Costs.
3.
Click Options.
You see the Options dialog box.
4.
Select Screen to display the report onscreen.
5.
Click OK.
You again see the Generate Reports dialog box.
131
Generating reports
Selecting the data

Now, you are ready to select the appropriate type of data to display in the report.
Select the data
1.
Click Select Data.

You see the Select Data dialog box.
2.

The product hierarchy appears in the list below. This is the information that you want to report. You
could further refine your choice by selecting only one account or center.
3.
Clear Budget in the Data Type section because the report will include only actual costs.
4.
Click OK.
You again see the Generate Reports dialog box.
5.
Click Report.
The Unit Costs report displays on your screen, although you may need to widen the window to see the
entire report.
132
Generating reports
Oros Quick uses the

file extension .MDL
6.
Close the report window.
7.
Save the model.
In the next lesson

Next, you will finish the tutorial.
133
Finishing up
By completing this tutorial, you have performed or previewed every essential step for building a model.
Exploring other features

Many features are not covered in this tutorial. These are:
G
Costing processes
G
Analyzing valueadded and nonvalueadded activities
G
Analyzing cost drivers
G
Calculating profitability
G
Importing data files or other information systems

Note:
Import and export are not available in Oros Quick.
G
Adding notes to items
G
Focusing on specific data for reports by using attributes
G
Merging accounts
What to do next
If you felt comfortable using the basic tools and techniques to build the Tyler Electronics model, use them
on a simple project of your own.
ABC Technologies has a variety of products, including videotapes and training classes, that can help you
learn more about activitybased costing, management, and budgeting. We can also help you build models
for your company. If you need additional information, contact your ABC Technologies representative.
134
Index
A
ABC analysis and scorecarding, 120
ABC Model Results Comparison, 88
ABC Systems
basic model, 5, 43
CAMI model, 5
CAMI standards, 5
Cost Assignment View, 6, 43
Process View, 6
purpose, 5, 89
summary, 89
using models, 5
ABC terminology See also Glossary, 18
ABC vs. traditional costing, 87
Accounts, 18
adding activity accounts, 23
adding resource accounts, 21
creating, 21
renaming, 22
Activity Driver, 6
Activity module, 19, 23
Analyzing scorecard results, 128
Assigning attributes, 52
Assignment
arrowheads, 36, 38
paths, 32, 34
attributes
centers, 51
Attributes
assigning, 52
calculated, 48
defining attribute centers, 51
defining numeric attributes, 47, 48
defining text attributes, 45
deleting, 55
displaying, 53, 61
entering quantities, 58
numeric, 46
removing, 55
text, 45
types, 45
use and benefits, 44

with calculated attributes, 47
with calculated drivers, 46
Autosave feature, 12
B
Basic steps, 7
review, 134
Bill of Cost
attaching external, 64
attaching internal, 67
attaching to an account, 64, 67
Bill of material, 62
defined, 62
external, 63
external units, 63
internal, 63
internal units, 63
materials requirement planning, 62
using, 62
C
Calculating costs, 81
viewing and interpreting errors, 83
viewing and interpreting the calculation
summary, 83
Calculating scorecard results, 126
CAMI
Cost Assignment View, 6
model, 5
Process View, 6
standards, 5
centers
attributes, 51
Centers, 18
Changing
properties in a column, 26
Closing
model, 15
Columns, 13, 25
change properties in a column, 26
135
Index
deleting, 28
Cost Driver, 6
Cost element
create, 21
Cost elements, 18
entered, 21
entering, 79
external units, 63
internal units, 63
purpose, 21
Cost Object module
entering units, 79
Cost OObject module, 19
Costs
attach external Bill of Cost, 64
attach internal Bill of Cost, 67
Bill of Cost, 62
Bill of material, 62
calculating, 81
create external units, 63
entering, 71
external units, 63
internal units, 63
viewing and interpreting calculation errors, 83
viewing and interpreting the calculation
summary, 83
viewing and verifying calculation results, 84
Create
account centers, 20
accounts, 21
activities structure, 23
activity accounts, 23
assignment paths, 36, 38, 41
attribute centers, 51
cost element, 21
cost objects structure, 24
external units, 63
list of drivers, 30
model folder, 8
model periods, 56
new model, 10
numeric attributes, 47, 48
performance measures, 60
reports, 130
resource accounts, 21
text attributes, 45
D
Delete
columns, 28
performance measures, 60
Delete attributes, 55
Destination view, 34, 71
Dialog box
Add Accounts for Assignments, 72, 74
Add Attributes, 52, 55
Add Bill of Costs, 64
Add External Units, 64
Add Internal Units, 67
Add Performance Measures, 60, 125
Calculate, 81, 126
Costs, 70
Define Attributes, 45, 48, 55, 100, 107
Define Drivers, 30
Define External Units, 63
Define Periods, 56
Delete Period Data, 58
Enter Attribute Quantities, 58
Enter Driver Quantities, 39, 41, 73, 76
Enter Output Quantities, 79
Equation Editor, 49
login, 9
Model Options, 19, 33, 97
Modeler login, 9
Scorecard Wizard available meters, 114
Scorecard Wizard measure and target values,
123
Scorecard Wizard select account, 112
Select Period, 57
Drivers
Activity, 6
activity assigned quantities, 77, 78
activity assignment paths, 77, 78
activity driver quantities, 76
assignment paths, 71, 74
building a list, 30
Cost, 6
default, 33
definition, 29
evenly assigned, 33
percentages, 33
Resource, 6
resource assigned quantities, 74
resource assignment paths, 74
resource driver quantities, 73
E
Elements scorecard, 91
Entering attribute quantities, 58
Exiting
model, 15
F
features not covered, 134
136
Index
M
main window, 13
Materials Requirements Planning (MRP) system,
62
Measuring scorecard objectives, 98
Meters
scorecarding, 98
Model
account centers, 20
activities, 23
assignment paths, 32, 34
autosave feature, 12
build drivers, 29
CAMI, 5
closing, 15
creating a folder, 8
exiting, 15
file extension, 12
name, 10
new, 10
opening, 15
periods, 56
planning, 17
save model as, 11
steps to building, 7
structure, 18
title, 10
Modeler
login dialog box, 9
password, 9
Modules
activity, 19, 23
cost object, 19, 24
resource, 18, 24
Multilevel view, 52, 124
program group, 9
Oros Quick
program group, 10
Output quantities
entering units, 79
P
Performance data
entering, 121
creating or deleting, 60
displaying, 61
Performance Measures, 59
Performancebased business plan, 129
Periods, 56
creating, 56
default, 56
Period1, 56
selecting, 57
Planning a model, 17
Properties, 13, 25
Q
Quantities
entering product units, 79
Ranking scorecard strategies and objectives, 94

Ranking table
displaying, 95
Ranking Table
customizing, 95
ranking description, 95
ranking value, 95
Ranks
viewing, 94
Removing attributes, 55
Reports, 130
generating, 130
sample unit costs report, 133
selecting data, 132
Resource Driver, 6
Resource module, 18
Objectives
adding, 92
measuring, 98
meters, 98
targets, 98
Objectives scorecard, 91
Opening
model, 15
Oros Modeler
Scorecard
analyzing results, 128
calculating results, 126
definition, 90
displaying performance, 121
elements of, 91
function, 90
N
Name
model, 10
Named view, 14
137
Index
importance, 90
measuring objectives, 98
meters, 98
meters and targets, 98
objectives, 91, 92
performancebased business planning, 129
ranking strategies and objectives, 94
scores and measures, 121
strategies, 91
targets, 98
viewing ranks and weights, 94
weighting strategies and objectives, 94
Source view, 37
Status bar, 13
Strategies
adding, 91
Strategies scorecard, 91
Summary center, 13
Title
model, 10
Toolbar
assignment, 14
Traditional/ABC Method Results Comparison,
88
Training, 134
Tyler Electronics description, 8
Targets
scorecarding, 99
Technical Support
contacting, 4
Terminology See also Glossary, 18
U
Units
entering quantities, 79
V
Views
destination, 14, 34, 71
multilevel, 52, 124
source, 37
Weighting scorecard strategies and objectives,

94
Weights
viewing, 94
138

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Tutorial

Oros ABC/M and Oros Scorecard

Oros ABC/M and

Copyright 19902001 ABC Technologies, Inc. All rights reserved.

Oros 5.2 July 2001

Part Number ABC520TUT

Introducing Activitybased Costing............................................... 5

Oros ABC/M and Oros Scorecard Tutorial

Exiting the application .................................................................................................................................. 15

Building modules, centers, and accounts ................................... 17

Building drivers ............................................................................. 29

Creating assignment paths........................................................... 32

Oros ABC/M and Oros Scorecard Tutorial

Adding attributes and performance measures............................ 44

Adding bills of costs ..................................................................... 62

Entering data ................................................................................. 70

Activitybased costing vs. traditional costing ............................ 87

Developing a scorecard ................................................................ 90

Analyzing a scorecard................................................................. 120

Generating reports ...................................................................... 130

Finishing up ................................................................................. 134

Oros ABC/M and Oros Scorecard Tutorial

Scope of this tutorial

Before beginning this tutorial

Comparison of Oros Modeler and Oros Quick

Additional training and tutorials

Scope of this tutorial

Implement an activitybased costing (ABC) model of your company

Provide a performance management framework that aligns, measures, and communicates

If you are new to activity

If you are experienced with activity

Before beginning this tutorial

Starting and quitting applications

Selecting commands from dropdown menus

Creating directories or folders

Files, folders, and path names

Open the model named Tyler.mdl.

Menu > Command

Select File > Save Model As.

Type Tyler Electronics.

User interface elements such as

Select Calculate Specific Modules.

Begin this tutorial

Perform step one.

Perform step two.

Text set off in this manner presents important information.

Oros ABC/M and Oros Scorecard Tutorial

Comparison of Oros Modeler and Oros Quick

Program group name is Oros

Program group name is Oros Quick

Model files use the extension AML. For example,

Model files use the extension MDL. For example,

Allows multiple users

Allows only a single user

Provides an Administrator application for issuing

No Administrator application provided because the

Includes an autosave option

Does not include an autosave option

No limit to the number of accounts that can be

Limited to 24 accounts within the Resource,