The Implementation of Activity Based Costing for Pricing
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THE IMPLEMENTATION OF ACTIVITY BASED COSTING 1 FOR PRICING DECISION IN ETEK CAFE PADANG SKRIPSI By Gita Kemala Sari 008201200077 Presented to The Faculty of Economics, President University In partial fulfillment of the requirements for Bachelor Degree in Economics, Major in Accounting President University Cikarang Baru – Bekasi Indonesia 2016 i PANEL OF EXAMINERS APPROVAL SHEET Herewith, the Panel of Examiners declare that the skripsi entitled “THE IMPLEMENTATION OF ACTIVITY BASED COSTING FOR PRICING DECISION IN ETEK CAFE PADANG” submitted by Gita Kemala Sari majoring in Accounting, Faculty of Economics was assessed and proved to have passed the Oral Examination on. Chair, Panel of Examiner, Misbahul Munir, Ak., MBA, CPMA, CA. Examiner 1 Drs. Gatot Imam Nugroho, Ak., MBA. Examiner 2 Monika Kussetya Ciptani, M.Ak. ii SKRIPSI ADVISOR RECOMMENDATION LETTER This skripsi entitled “THE IMPLEMENTATION OF ACTIVITY BASED COSTING FOR PRICING DECISION IN ETEK CAFE PADANG” prepared and submitted by Gita Kemala Sari in partial fulfillment of the requirements for Bachelor Degree in Economics - Major in Accounting, has been reviewed and found to have satisfied the requirements for a thesis fit to be examined. We therefore recommend this thesis for Oral Defense. Cikarang, Indonesia, 12 April 2016 Acknowledge Skripsi Advisor, Misbahul Munir, Ak., MBA, CPMA, CA. Monika Kussetya Ciptani, M.Ak Head, Accounting Study Program Thesis Advisor iii DECLARATION OF ORIGINALITY This thesis entitled “THE IMPLEMENTATION OF ACTIVITY BASED COSTING FOR PRICING DECISION IN ETEK CAFE PADANG” prepared and submitted by Gita Kemala Sari is to the best of my knowledge and belief, an original piece of work that has not been submitted, either in whole or in a part, to another university to obtain a degree. Cikarang, Indonesia, 12 April 2016 Researcher, Gita Kemala Sari 008201200077 iv THE IMPLEMENTATION OF ACTIVITY BASED COSTING FOR PRICING DECISION IN ETEK CAFE PADANG ABSTRACT The main objective of this study is to help the management of Etek Cafe in pricing decision using activity based costing. Currently, the management of Etek Cafe is using the traditional method in pricing decision. Whereas, the traditional method leads to the distortion of a price of a product such as under-cost and over-cost. Activity based costing is designed to overcome the distortions of traditional method. This study is using a descriptive qualitative analysis approach where the objective is to describe systematically calculation the production costs using traditional method and activity based costing for pricing decision in Etek Cafe Padang. The data analysis are through four stages: calculation the production costs using activity based costing method, calculation the production costs using the traditional method, the comparison of the results using traditional method and activity based costing, and the pricing decision before and after profit. The results of production costs using activity based costing and traditional method are overcost after profit. Etek Cafe get loss about Rp 16.557,11 caused by the non added value materials of Indomie Goreng and Indomie Rebus. The recommendation for future research may add another factor that influence pricing decision analysis such as competitor and costumers. In addition, for future research may add another Cafe in different city as the comparison. Keywords: Activity Based Costing, Production Costs, Traditional Method, Pricing Decision. v ACKNOWLEDGEMENT First of all, the writer would like to praise and thanks to Allah SWT and Nabi Muhammad SAW for the blessing that made the writer through the difficulties to finish this thesis. In addition, this thesis also can be done by support from all parties that give the writer inspiration to finish this thesis: 1. To my beloved parents H. Yuneldi and Hj. Elmi Yetti, my beloved sister Winda Widyastuti S.P, thanks for the praying, support and motivation that woke me up to finish the skripsi soon, 2. Mrs. Monika Kussetya Ciptani M.Ak, as the writer’s advisor who has being patient in giving guidance and advice to finish this skripsi, 3. Mr. Misbahul Munir, as Head of Accounting Study Program and Dean of Faculty Business, 4. My beloved gangsta Shara Anasthasya, Yohana Densi Lunita, Sophia Dwi Ratna and Sandra Ruth Grace for the best friendship and togetherness atmosphere during our play hard and tough life, The writer realized this research is still far from perfection. All the critics and suggestion are really received to make the furthermore much better. This skripsi is dedicated for my beloved parents and all the readers. Hopefully this can give benefits for the readers. vi TABLE OF CONTENT TITLE...................................................................................................................................i PANEL OF EXAMINERS APPROVAL SHEET ............................................................. ii SKRIPSI ADVISOR RECOMMENDATION LETTER .................................................. iii DECLARATION OF ORIGINALITY ............................................................................. iv ABSTRACT ....................................................................................................................... v ACKNOWLEDGEMENT ................................................................................................. vi TABLE OF CONTENT ................................................................................................... vii LIST OF TABLE ............................................................................................................... ix LIST OF FIGURE ............................................................................................................. xi CHAPTER I ....................................................................................................................... 1 INTRODUCTION .............................................................................................................. 1 I.1. Research Background .......................................................................................... 1 I.2. Problem Identification and Statement ................................................................. 3 I.3. Research Scope and Limitation ........................................................................... 3 I.4. Research Objectives ............................................................................................ 4 I.5. Research Benefits ................................................................................................ 4 CHAPTER II ...................................................................................................................... 5 LITERATURE REVIEW ................................................................................................... 5 II.1. Theoretical Review ............................................................................................. 5 II.1.1. Production Costs .................................................................................................. 5 II.1.1.1. Definition of Production Costs ............................................................................ 5 II.1.1.2. Types of Production Costs ................................................................................... 5 II.1.1.3. Production Costs Methods ................................................................................... 7 II.1.2. Traditional Method .............................................................................................. 8 II.1.2.1. Definition of Traditional Method ........................................................................ 8 II.1.2.2. Weaknesses of Traditional Method ..................................................................... 8 II.1.2.3. Allocation Costs in Traditional Method ............................................................. 9 II.1.3. Activity Based Costing Method ........................................................................ 11 II.1.3.1. Definition of Activity Based Costing Method .................................................. 11 II.1.3.2. Benefits of Activity Based Costing Method ..................................................... 12 II.1.3.3. Limitations of Activity Based Costing Method ................................................. 13 vii II.1.3.4. Steps in Implementing Activity Based Costing Method ................................... 14 II.1.3.5. Cost Driver ......................................................................................................... 15 II.1.3.6. Pricing Decision ................................................................................................. 17 II.1.3.7. Differences of Traditional Method and Activity Based Costing Method .......... 18 II.2. Theoretical Framework ...................................................................................... 20 II.3. Previous Research .............................................................................................. 23 CHAPTER III ................................................................................................................... 24 RESEARCH METHODOLOGY ..................................................................................... 24 III.1. Research Method ............................................................................................... 24 III.2. Company’s Existing Condition ......................................................................... 25 III.3. Data Collection .................................................................................................