THE IMPLEMENTATION OF ACTIVITY BASED COSTING 1 FOR …

i

1 THE IMPLEMENTATION OF ACTIVITY BASED COSTING

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

ii

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.

iii

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

Misbahul Munir, Ak., MBA, CPMA, CA.

Head, Accounting Study Program

Skripsi Advisor,

Monika Kussetya Ciptani, M.Ak

Thesis Advisor

iv

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

v

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.

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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.

vii

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

viii

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 .................................................................................................. 27

III.3.1. Case Study ......................................................................................................... 27

III.3.2. Interview ............................................................................................................ 28

III.1.2.1. Interview Procedures ......................................................................................... 29

III.4. Data Processing ................................................................................................. 29

III.5. Operational Variables ........................................................................................ 29

CHAPTER IV ................................................................................................................... 31

ANALYSIS OF DATA AND INTERPRETATION OF RESULT ................................. 31

IV.1. Data Analysis .................................................................................................... 31

IV.1.1. Production Costs ............................................................................................... 31

IV.1.1.1. Direct Materials Costs ....................................................................................... 31

IV.1.1.2. Direct Labor Costs ............................................................................................ 38

IV.1.1.3. Factory Overhead Costs .................................................................................... 39

CHAPTER V .................................................................................................................... 63

CONCLUSION AND RECOMMENDATION ............................................................... 63

V.1. Conclusion ......................................................................................................... 63

V.2. Recommendation ............................................................................................... 64

REFERENCES ................................................................................................................. 65

APPENDIX I .................................................................................................................... 69

APPENDIX II ................................................................................................................... 70

APPENDIX III ................................................................................................................. 71

ix

LIST OF TABLE

Table 2.1 Allocation Costs in Traditional Method .......................................................... 10

Table 4.1 Pricelist on Etek Cafe .......................................................................................... 31

Table 4.2 List of Direct Material Costs in Etek Cafe ............................................................ 32

Table 4.3 List of Total Customer in Etek Cafe ..................................................................... 33

Table 4.4 List of Direct Material Costs of Fried Fried in Etek Cafe ..................................... 34

Table 4.5 List of Direct Material Costs of Indomie Goreng in Etek Cafe ............................. 35

Table 4.6 List of Direct Material Costs of Indomie Rebus in Etek Cafe ............................... 36

Table 4.7 List of Direct Material Costs of Pecel Ayam in Etek Cafe .................................... 37

Table 4.8 List of Direct Material Costs of Fried Kwetiau in Etek Cafe ................................ 38

Table 4.9 List of Direct Labor Costs in Etek Cafe................................................................ 49

Table 4.10 List of Factory Overhead Cost in Etek Cafe ....................................................... 40

Table 4.11 Activity Cost Pools in Etek Cafe ......................................................................... 41

Table 4.12 Cost Driver of Purchasing Activity in Etek Cafe ................................................ 45

Table 4.13 Cost Driver of Recording Customer Orders in Etek Cafe .................................. 45

Table 4.14 Cost Driver of Cooking Orders in Etek Cafe ...................................................... 46

Table 4.15 Cost Driver of Plating in Etek Cafe .................................................................... 46

Table 4.16 Cost Driver of Delivery The Products in Etek Cafe ............................................ 47

Table 4.17 Cost Driver of Cleaning in Etek Cafe ................................................................. 47

Table 4.18 Cost Driver of Other Overhead Costs in Etek Cafe ............................................ 48

Table 4.19 Total of Factory Overhead Costs of Fried Rice Using ABC Method ................... 48

Table 4.20 Total of Factory Overhead Costs of Indomie Goreng Using ABC Method ......... 49

Table 4.21 Total of Factory Overhead Costs of Indomie Rebus Using ABC Method ........... 50

Table 4.22 Total of Factory Overhead Costs of Pecel Ayam Using ABC Method ................. 50

Table 4.23 Total of Factory Overhead Costs of Fried Kwetiau Using ABC Method ............ 51

x

Table 4.24 Calculation of Production Costs Using Activity Based Costing Method ............. 52

Table 4.25 Total of Factory Overhead Costs of Fried Rice Using Traditional Method ........ 54

Table 4.26 Total of Factory Overhead Costs of Indomie Goreng Using Traditional Method54

Table 4.27 Total of Factory Overhead Costs of Indomie Rebus Using Traditional Method . 54

Table 4.28 Total of Factory Overhead Costs of Pecel Ayam Using Traditional Method ...... 54

Table 4.29 Total of Factory Overhead Costs of Fried Kwetiau Using Traditional Method .. 55

Table 4.30 Calculation of Production Costs Using Traditional Method .............................. 55

Table 4.31 Differences of Activity Based Costing Method and Traditional Method’s

Results ................................................................................................................................. 57

Table 4.32 Pricing Decision Using Traditional Method in Etek Cafe ................................... 58

Table 4.33 Pricing Decision Using Activity Based Costing Method in Etek Cafe ................. 59

Table 4.34 Differences of Pricing Decision Using Traditional Method and Activity Based

Costing in Etek Cafe ............................................................................................................. 61

xi

LIST OF FIGURE

Figure 2.1 Theoretical Framework ................................................................................... 22

Figure 3.1 Organizational Structure ................................................................................ 27

xii

1

CHAPTER I

INTRODUCTION

I.1. Research Background

The setting of a price for a product is one of the most important decisions for

an organization. If the price is set too high the customer may turn away, but a high

price may also associate with desirability to the customer . If a business can achieve

an efficient price for their product, they will maximise their revenue earned.

Costing system plays an important role in decision making process in any

company. The cost accounting system is designed to provide information to

managers for decision pertaining to control and planning (Langfield-Smith, Thorne

and Hilton:2009).

One of the cost accounting system is traditional cost accounting. Traditional

cost accounting is not accurate in determining the cost of product. Traditional cost

accounting is also fail to provide accurate and relevant information for decision

making. Companies that fail to measure their costs correctly are not measuring their

profit correctly (Kotler:2000). Traditional cost accounting leads to error in

determining the cost of product and not accurate for pricing decision. Under-cost

and over-cost will occur due to the distortions of traditional cost accounting.

Activity based costing is designed to overcome the distortions caused by

traditional cost accounting. According to Hansen and Mowen (2006:154) activity

based costing is assigned the overhead costs on each activity. An important function

2

of activity based costing is to define the activities of company as value adding or

non-value adding activity. Value added activities are tasks undertaken by the

company for which the customers are usually willing to pay for the services. On the

other hand, non-value added activities create waste, result in delay, add costs to the

products, or for which cost customers are not willing to pay (Manalo:2001).

Etek Cafe is established on Mei 2012 and located in strategy area near UPI

YPTK Padang. Over these three years, management of Etek Cafe Padang is using

traditional cost accounting for pricing decision and set a low price to attract the

customers. Therefore, the management of Etek Cafe Padang is confused whether the

current price are under-cost and over-cost. As the effect of inaccuracies of pricing

decision, the management is difficult to determine the net profit or loss.

Based on the description above, the authors are interested in conducting

research on pricing decision with activity based costing method. Therefore, this

study titled:

“THE IMPLEMENTATION OF ACTIVITY BASED COSTING FOR

PRICING DECISION IN ETEK CAFE PADANG”

3

I.2. Problem Identification and Statement

This research will conduct the case study on Etek Cafe in Padang. Etek Cafe have

various menus; Fried Rice, Indomie Goreng, Indomie Rebus, Pecel Ayam and Fried

Kwetiau. Since 2012 until now, Etek Cafe Padang is using traditional cost accounting for

pricing decision. Traditional cost accounting assigns the overhead cost directly to the

product by single perspective, which is volume of a product. One of the weaknesses of

traditional cost accounting is the distortions of price; under-cost and over-cost. Activity

based costing is designed to overcome the distortions caused by the traditional cost

accounting. In addition, activity based costing is more accurate for the company that have

different products and it will measure the production cost based on each activity on Etek

Cafe Padang. As the result, activity based costing will help the management of Etek Cafe in

pricing decision.

Based on problem identification above, the writer tries formulating the problem, as

follows: “How does the implementation of activity based costing for pricing decision in

Etek Cafe Padang?”

I.3. Research Scope and Limitation

This research was aimed to help Etek Cafe’s management in pricing

decision. The problem restricted to measure the production cost of Etek cafe using

activity based costing for foods; Fried Rice, Indomie Goreng, Indomie Rebus, Pecel

Ayam and Fried Kwetiau in stable economic situation. This method used in this

research is case study using explanatory method. The researcher interviewed the

management of Etek Cafe and the place where the research conducted was in

4

Padang. This research was limited to help the management of Etek Cafe for pricing

decision by determining the production cost.

I.4. Research Objectives

The objectives that the writer wants to achieve from this thesis is to understand the

implementation of activity based costing for pricing decison in Etek Cafe Padang.

I.5. Research Benefits

The objectives that the writer wants to achieve from this thesis are :

a. For The Management of Company

As references for management of Etek Cafe and other company for pricing

decision using activity based costing. In addition, as reference of Etek Cafe’s

management to analyze the value added and non-value added activities.

b. For Other Researchers

As references for other researcher who wants to continue the research

regarding production costs, pricing decision and activity based costing issues or

problems.

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CHAPTER II

LITERATURE REVIEW

II.1. Theoretical Review

II.1.1. Production Costs

II.1.1.1. Definition of Production Costs

According to Blocher, et al (2000:90) production cost is costs that

have been incurred to produce products or services. Production cost

according to Hansen and Mowen (2009:60) reflects the total cost to produce

products and services. Production cost incurred to convert raw material into

finished good.

Production cost according to Horngren, Datar, and Foster (2006:35)

can be divided into direct material, direct labor and factory overhead.

Meanwhile, according to Mulyadi (2005:16) production cost is all cost

incurred in processing raw material into finished goods, which are used to

calculate the cost of finished goods and the cost of work in process product

at the end of accounting period.

II.1.1.2. Types of Production Costs

According to Horngren, Datar and Foster (2006:35) cost of

production incurred are classified into three parts, as follows:

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1) Direct Material Cost.

Direct material costs is all materials directly related to work

in process and finished good and included into the calculation of

production cost. In other word, direct material can be traced directly

to the product because direct material is part of finished goods. In

addition, there are some supporting materials to convert raw material

into finished goods and cannot traced directly into a product, called

indirect materials.

2) Direct Labor Costs.

Direct labor costs are costs that arise because someone has

sacrificed time, energy and mind to produce goods or services.

According to Horngren, Datar and Foster (2006:35) direct labor is

labor that directly performs the conversion process of raw material

into finished good and include the compensation of all

manufacturing labor that can be traced to the cost of object.

3) Factory Overhead Costs.

Factory overhead is also referred to as manufacturing

overhead costs or indirect manufacturing costs. According to

According to Horngren, Datar and Foster (2006:35) factory overhead

cost is all cost that incurred to produce the products and services but

cannot be traced directly into the product or service. Factory

overhead according to Hansen and Mowen (2006:51) is all costs

7

incurred during the production activities except direct labor costs and

direct material costs.

II.1.1.3. Production Costs Methods

According to Horngren, Datar and Foster (2006:93) the calculation of

production cost consists of two methods, as follows:

1) Job Costing

Job costing is a system for assigning manufacturing costs to

an individual product or batches of products. Generally, the job

costing system is used only when the products are sufficiently

different from each other. Since there is a significant variation in the

products, the job order costing system will create a job cost record

for each item, job or special order. The job cost record will report the

direct materials and direct labor actually used plus the manufacturing

overhead assigned to each job.

2) Process Costing

Process costing is used when there is mass production of

similar products, where the costs associated with individual units of

output cannot be differentiated from each other. In other words, the

cost of each product produced is assumed to be the same as the cost

of every other product. Under this concept, costs are accumulated

http://www.accountingcoach.com/blog/what-are-manufacturing-costs

http://www.accountingcoach.com/blog/what-is-direct-labor

http://www.accountingcoach.com/blog/what-is-manufacturing-overhead-and-what-is-included

http://www.accountingcoach.com/blog/what-is-manufacturing-overhead-and-what-is-included

8

over a fixed period of time, summarized, and then allocated to all of

the units produced during that period of time on a consistent basis.

II.1.2. Traditional Method

II.1.2.1. Definition of Traditional Method

According to Hansen and Mowen (2004:57), traditional method

applies indirect costs to product based on a predetermined overhead rate.

Unlike activity based costing, traditional method treat overhead costs as a

single pool of indirect costs. Traditional method is optimal when indirect

costs are low compared to direct costs. There are several steps in the

traditional method, as follows:

1) Identify indirect costs.

2) Estimate indirect costs for the appropriate period (month, quarter,

year).

3) Choose a cost driver with a causal link to the cost (labor hours,

machine hours).

4) Estimate an amount for costdriver for the appropriate period.

5) Compute the predetermined overhead rate.

6) Apply overhead to products using the predetermined overhead rate.

II.1.2.2. Weaknesses of Traditional Method

The traditional method uses two step allocation process for cost

allocation. In the first stage, traditional method allocates costs to production

9

divisions, sometimes called cost centers where the overheads are being

pooled by departments. Traditional method allocates overheads using

allocation bases from cost centers to products depend on the volume

produced and examples of allocation bases are direct labor and machine

hours.

The traditional costing system has been criticized since the 1980s. It

is presented as being too limited and provides a company with distorted cost

information that can have negative impact on decision making. The

traditional cost systems fail to provide management with relevant

information on how and where costs are being incurred. At the end, it is

difficult for the company to cut back spending on inefficient activities or

products.

The traditional cost systems use an arbitrary method of assigning

costs, which mean overhead are connected with products. It is less costly to

implement but can be misleading at the same time. With distorted

information managers can support decisions on the wrong basis and

consequently, it will generate long-term losses for the company.

II.1.2.3. Allocation Costs in Traditional Method

According to James R. Martin, Ph.D., CMA professor Emeritus,

University of South Florida, written in http://maaw.info/Chapter6.htm, there

are three methods of costs allocation in traditional method; single plant wide

rate overhead rate, separate departmental overhead rates and multiple

10

activity based overhead rates for each department that will described on the

table 2.1 below:

Table 2.1

Cost Allocation in Traditional Method

Method of

Assigning

Overhead

Number

of

Stages

Type of

Allocations

Basis of

Overhead Rates

When

Applicable

Single Plant

Wide Rate

1 From a single

aggregated

cost

pool to

products.

A production

volume related

activity measure.

The examples are

direct labor

hours, machine

hours and etc.

Plant produces only

one, or a few similar

products that

consume all indirect

resources in the

same proportions.

Single Rate Per

Department

2 From service

departments

to producing

department’s

single cost

pools

(overhead

accounts), to

products.

A production

volume related

activity measure.

These may be

different for each

department.

Each department

produces only one,

or a few similar

products that

consume all of a

department's indirect

resources in the

same proportions.

Multiple 2 or From service Both production Each department

11

Activity Based

Rates Per

Department

More departments,

to producing

department’s

activity cost

pools, to

products.

volume related

and non-

production

volume related

activity measures.

produces many

products that

consume resources

within each

department in

different proportions

II.1.3. Activity Based Costing Method

II.1.3.1. Definition of Activity Based Costing Method

According to Horngren, Datar and Foster (2006:131) activity based

costing is an accurate method to determine the cost of product. In addition,

activity based costing also gives the information about the causes of cost

incurred and how to manage the cost. Activity based costing tries to identify

the real costs associated with serving different customers (Kotler:2000).

According to Garrison and Noreen (2000:342) activity based costing

is designed to provide information for management of company for decision

making that influence the production activity including variable cost and

fixed cost. Activity based costing is a system that attempts to accurately

trace indirect costs to products by allocating indirect costs to activities and

then to products based on their usage of the activities. Activity based costing

is optimal when accuracy is very important and when indirect costs

comprise a large proportion of total costs compared to direct costs.

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Activity based costing is a process of costing system which focuses

on activities performed to produce products. This system assumes that

activities are responsible for the incurrence of costs and products create the

demand for activities. Costs are charged to products based on individual

product's use of each activity.

According to Carter and Usry (2002) activity based costing allocates

overhead costs to products on the basis of resources consumed by each

activity involved in the design, production and distribution of a particular

product. The allocation of overhead costs is accomplished by assigning costs

to cost pools that represent specific activities and allocating the costs using

cost drivers to the product. Cost drivers are activities, which have direct

cause and effect relationship to the occurrence of a particular product.

II.1.3.2. Benefits of Activity Based Costing Method

According to Blocher, Stout and Cokins (2010:133) there are four

benefits of activity based costing, as follows:

1) Proper profitability measures.

Activity based costing provides more accurate and informative

product costs, leading to more accurate product and customer

profitability measurements and to better-informed strategic decisions

about pricing, product lines, and market segments.

13

2) Better decision making.

Activity based costing provides more accurate measurements of

activity-driving costs, helping managers to improve product and

process value by making product design decisions, better customer

support decisions, and fostering value-enhancement projects.

3) Process improvement.

Activity based costing provides the information to identify areas

where process improvement is needed.

4) Cost estimation.

Improve product costs lead to better estimates of job costs for pricing

decision, budgeting and planning.

II.1.3.3. Limitations of Activity Based Costing Method

According to Garrison, Noreen, Brewer, Cheng and Yuen (2012:312)

there are several limitations of activity based costing method. First is

activity based costing is more costly rather than traditional method.

Implementing activity based costing is a major project that requires

substantial resources. And once implemented, an activity based costing

system is more costly than traditional method because activity based costing

concerning with many activity and costs in each activity must be

periodically collected, checked, and entered into the system.

Second is activity based costing method is change the system in

organizations. According to Garrison, Noreen, Brewer, Cheng and Yuen

(2012:312) managers are accustomed to using traditional costing system to

14

run their business operations and traditional systems are often used in

performance evaluations. And once activity based costing is implemented, it

will change all of the system in organizations.

The third is activity based costing data can easily be misinterpreted.

Activity based costing data can be easily misinterpreted and must be used

with care for decision making. Costs assigned to products, customers and

other cost objects are only potentially relevant. Before making any

significant decision using activity based costing data, managers must

identify which costs are really relevant for the decisions at hand.

II.1.3.4. Steps in Implementing Activity Based Costing Method

Activity based costing uses cost drivers to assign the costs of

resources to activity and unit cost as a way of measuring an output. There

are three steps to implementing activity based costing according to Blocher,

Stout and Cokins (2010:132), as follows:

1) Identify resources costs and activities.

The first step in designing an activity based costing is to conduct an

activity analysis to identify the resource costs and activities of the

company.

2) Assign resource costs to activities.

Activity based costing uses resource consumption cost drivers to

assign resource costs to activities. Because activities drive the cost of

15

resources used in operations, a company should choose resource

consumption cost drivers based on cause-and-effect relationships.

3) Assign activity costs to cost of object.

The final step is to assign costs of activities or activity cost pools to

cost objects based on the appropriate activity consumption cost

drivers. Outputs are the cost objects for which firms or organizations

perform activities. Typical outputs for a cost system are products and

services; however, outputs also can include customers, projects, or

business units.

II.1.3.5. Cost Driver

A cost driver is the unit of an activity that drives the change of cost

in production or servicing. It refers to any activity that causes a cost to be

incurred. In traditional method, the cost driver used to allocate overhead

costs to cost objects relates to quantity of output.

There are two main types of supporting cost. The first is a resource

driver, which is the contribution of the quantity of resources used to cost an

activity, such as one kilogram of flour for bread production and one operator

hour for manufacturing work. Examples of an overhead cost and resource

cost driver are electricity costs and the number of machine hours.

The second is an activity driver, which is the cost incurred by the

activities required to complete a specific task. With changes in business

structures, technology and related cost structures, output quantity are not the

16

only cost driver. Examples of overhead costs and activity cost drivers are

inspection costs and the number of inspections or the hours of inspection or

production runs. These have no direct relationship with production volume,

but they directly affect production costs through the activity measured.

In general the cost driver for short-term overhead costs may be the

volume of output or activity. For long-term overhead costs, the cost drivers

will not be related to volume of output or activity. Further investigation of

these organizational activities and operational activities is required in order

to examine the nature of the cost before designing the cost driver.

In an activity based costing system, costs are categorized on the basis

of the different types of cost drivers utilized. According to Horngren, Datar

and Foster (2006:139) activity based costing systems commonly use a cost

hierarchy having four levels, as follows:

1) Output unit level costs are the costs of activities performed on each

individual unit of a product or service. These costs increase as the

number of units produced increases.

2) Batch level costs are the costs of activities related to a group of

units of products or services rather than the individual unit. Set-up

costs are an example of batch level costs, as this cost is incurred

once for each batch, regardless of the size of the batch.

3) Product sustaining costs or service sustaining costs are the costs of

activities undertaken to support individual products or services

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regardless of the number of units or batches produced. Design costs

are an example of this type of cost.

4) Facility sustaining costs are the costs of activities that cannot be

traced to individual products or services but support the

organization as a whole. These costs usually lack a cause-and-effect

relationship between the cost and the allocation base. Examples of

this type of cost include general administration, rent, and building

security.

II.1.3.6. Pricing Decision

Pricing decision is very important, when price of product is too high

or too low could lead to looses for the company. According to

Horngren,Datar and Foster (2006:398) there are some factors that influence

pricing decision, as follows:

1) Customers

Management of company should be aware about the pricing

decision. In determining the price of product, management should

be on the perspective of customer because wrong decision may lead

to the customer rejection. Nowadays, many substitute products had

been created and customer may decide to buy product with cost-

effective comparison.

2) Competitors

Competitors are very important in determining the decision pricing.

The reaction of competitors will be seen in the pricing decision. The

18

example: when iPhone is launched by Apple, Samsung

automatically gave reaction by announced the other product with

the effective price. Competitors are also important to create

competitive atmosphere, improvement of technology and product

innovation.

3) Costs

Actually the minimum price of product is zero and it is impossible

because in determining the price of product, company also should

calculate all cost occurred during the production process. High price

not always means the rejections of customers because price of

products also depend on brand and quality of products.

II.1.3.7. Differences of Traditional Method and Activity Based Costing

Method

The traditional method of costing relied on the arbitrary addition of a

proportion of overhead costs on to direct costs to attain a total product cost.

The traditional approach to cost allocation relies on three basic steps, as

follows:

1) Accumulate costs within a production or non-production department.

2) Allocate non-production costs to production departments.

3) Allocate the resulting production department costs to various

products, services or customers.

19

According to Garrison, Noreen, Brewer, Cheng and Yuen (2012:276)

activity based costing differs from traditional based costing in three ways, as

follows:

1. Non-manufacturing as well as manufacturing costs may be assigned

to products, but only on a cause-and-effect basis.

2. Some manufacturing costs may be excluded from production costs.

3. Numerous overhead cost pools are used, each of which is allocated to

products and other cost objects using its own unique measure of

activity.

Traditional method of costing has become increasing inaccurate as

the relative proportion of overhead costs has risen. This distortion of costs

can result in inappropriate decision making.

Activity based costing is therefore an alternative approach to the

traditional method or arbitrary allocation of overheads to product, services

and customers. In contrast to traditional cost accounting systems, activity

based costing systems first accumulate overheads for each organizational

activity. Then, assign the costs of these activities to products, services or

customers causing that activity.

The initial activity analysis is clearly the most difficult aspect of

activity based costing. Activity analysis is the process of identifying

appropriate output measures of activities and resources cost drivers and their

effects on the costs of making a product or providing a service.

20

Activity based costing systems have the flexibility to provide special

reports so that management can take decisions about the costs of designing,

selling and delivering a product or service. The key aspect is activity based

costing focuses on accumulating costs through activities, whereas traditional

cost allocation focuses on accumulating costs within functional areas. The

main advantage of activity based costing is it minimizes or avoids

distortions on product costs that might occur from arbitrary allocation of

overhead costs.

II.2. Theoretical Framework

Traditional method was unable to charge the overhead cost to each product

appropriately to each production. The main factors cause of the inability of

traditional method for overhead charge appropriately according to Blocher et al

(2001: 118) is the proportion of overhead costs not associated with the unit to the

total overhead costs of production and the level of diversity.

Distortion costs incurred in traditional method can be solved using activity

based costing method. Activity based costing method according to Blocher et al

(2007: 222) in order to fulfill the customer’s orders, resources are needed to produce

products or services. The resources are charged to the activity, then the activity

charged to cost objects based on their use.

Calculation of production costs to determine the cost of the product on Etek

Cafe for pricing decision still use the traditional method, whereas the products of

Etek Cafe are more than one. As a result, inaccuracies for pricing decision. This

requires new methods that can be used to calculate the cost of the product more

21

accurately. Activity based costing is one of perfect solution to be able to determine

the cost of the product for pricing decision accurately. The implementation of

activity based costing is done by identifying activities that exist in the company.

22

23

II.3. Previous Research

There are some researchers that have a similar topic that can be taken as the

references for this study. Evi Linda Lestari (2015) said that determining the

production cost is very important for pricing decision and activity based costing is

the best method to calculate the production cost compare to the traditional method.

Activity based costing helps the management of company to detect the overcost and

undercost in each products.

In Lala Dwi Astuti (2015) there are three parts of production costs, such as

the direct material costs, direct labor costs and factory overhead costs. As the result,

activity based costing helps the management to find the distortions which is

undercost due to the traditional method.

According to research of Shabrina Nur Adila (2014) activity based costing

not only help the management for pricing decision in manufacturing company but

service company also, such as hotel and hospital. Activity based costing is more

accurate than traditional method. Acitivity based method help the management to

allocate the factory overhead costs based on the cost driver each activity and it helps

the management to manage the cost occured in each activity.

24

CHAPTER III

RESEARCH METHODOLOGY

III.1. Research Method

Research is a logical and systematic search for new and useful information

on a particular topic. Research is not confined to science and technology only.

There are various areas of research such as languages, literatures, history and

sociology. Whatever might be the subject, research has to be an active, diligent, and

systematic process of inquiry in order to discover, interpret, or revise facts, events,

behaviors and theories. Research is done with the help of study, experiment,

observation, analysis, comparison and reasoning (Rajasekar, Philominathan,

Chinnathambi, 2013).

There are two kinds of research method. First is quantitative research

method, which is based on measurement quantity or amount. Second is qualitative

research which concerned with qualitative phenomenon. The other researches are

action research, explanatory research, and comparative research.

The purpose of research is to discover answers to questions through the

applications of scientific procedures. The main objective of research is to find out

the truth which is hidden and which has not been discovered as yet. There are

several objectives of research, as follows:

1) To gain familiarity with a phenomenon or to achieve new insights into it and

it called as exploratory research.

25

2) To portray accurately the characteristics of a particular individual, situation

or a group and it called as descriptive research.

3) To determine the frequency with which something occurs or with which it is

associated with something else and it called as diagnostic research.

4) To test a hypothesis of a casual relationship between variables and it called

as hypothesis testing research.

The researcher used the qualitative research methodology in conducted this

research. The researcher used qualitative research because the researcher conducted

a case study by interviewed the management of company to get the primary data. In

addition, the researcher used descriptive and explanatory research method to

describe and explore the variable more in order to get best result in implementing

the activity based costing for pricing decision in Etek Cafe Padang.

III.2. Company’s Existing Condition

Etek Cafe was established on May 2012. Etek Cafe is located on strategic

area, around UPI YPTK Padang which is university in Padang and PT. Gudang

Garam Tbk of west Sumatera. The main customers are the collage students and

employee of PT. Gudang Garam.

The owners are husband and wife, Mr.Yuneldi and Mrs. Elmi Yetti. Mr.

Yuneldi had been retired on 2012 as government employee and Mrs. Elmi Yetti is

the government employee. Since Mr. Yuneldi was retired on 2012, he tried to find

other opportunity to get money. Mrs. Elmi Yetti has legacy in form of land from her

mother about 2700m2, and Mr. Yuneldi see the opportunity to built a cafe about

150m2.

26

The cafe named Etek cafe because Mrs. Elmi Yetti is called Etek in her

family means aunty. As the owners, Mr. Yuneldi and Mrs. Elmi Yetti hire Mr. Yudi

Darma Putra and Ms. Winda Widyastuti as the management of the company. Mr.

Yudi Dharma Putra is live in the cafe at the second floor with his family. Everyday,

Mr. Yudi Darma Putra responsible to open the cafe at 7.00 am and close at 9.00 pm.

Mr. Yudi Dharma Putra also responsible for the production process. Every morning

before cafe is opened, Mr. Yudi purchase the materials needed.

Ms. Winda Widyastuti is responsible for the cashier. Every evening before

the cafe is closed, Ms. Winda reports the finance to Mr. Yuneldi and he will manage

the finance of company directly. As a whole, people around the cafe seen Etek Cafe

as a family business because Mr. Yudi is Mrs. Elmi Yetti’s nephew and Ms. Winda

is the owner’s daughter.

Mr. Yuneldi is set the system payroll. All of employee of Etek Cafe will

receive salaries once a week. Since 2012 until now, Mr. Yuneldi as the head of Etek

Cafe never manage the finance properly. Everyday, Mr. Yuneldi collects the

revenue and directly deduct it with the expenses. The expenses are including all of

employee salaries, electricity, water, material, and etc. In other words, Mr. Yuneldi

never classified the expenses. Therefore, Mr. Yuneldi have some difficulties to

control the expense and reduce the costs. As the effect of the financial system in

Etek Cafe, Mr. Yuneldi has another difficulty in pricing decision. Around these

three years, Mr. Yuneldi set the price of the product based on traditional method,

the willingness of the customers to buy and compare the price to the other Cafe.

Due to the pricing decision, Mr. Yuneldi a little bit confused whether the price of

the product will lead to gain or loss. The gross profit will accumulated everyday and

27

at the end of the months, the profit will divided into two: Mr. Yuneldi and Mr. Yudi

Darma Putra.

Figure 3.1. Organizational Structure

III.3. Data Collection

III.3.1. Case Study

The researcher was aimed that the case study is very suitable with the title of

this research which is The Implementing The Activity Based Costing For

Pricing Decision in Etek Cafe Padang because case study which is more

comprehensive than the others and seeks for explanations and answers. According

to Saunders (2009:146) a case study enables the author to generate response of why,

what and how, which provides the researcher with better understanding of the

context of the research.

Mr. Yuneldi and Mrs. Elmi Yetti

(Owner)

Mr. Yudi Dharma Putra

(Operational Manager)

Winda Widyastuti

(Cashier)

Chef Waitress Cleaning Service

28

According to Yin (2009:18) a case study is an empirical inquiry that

investigates a contemporary phenomenon within its real life context, especially

when the boundaries between phenomenon and the context are not clearly evident.

According to Saunders (2009:146) the data collection varies with the chosen

method to answer the research questions may be in the form of interviews,

observations, documentary analysis or questionnaires.

III.3.2. Interview

Collecting data through interviews will enable researcher to obtain the

relevant information for this research and also gives the respondent the freedom to

provide personal view and opinions on the subject. In addition, the researchers will

gain comprehensive answers from the questions asked as it is open-ended questions.

This approach will enable researcher to guide the respondent through the questions

and ask more questions that are relevant for the research.

There are two major types of research interviews. First is the structured

interview which is widely used in quantitative data collection, the example is in

survey research. The interviewer usually uses standardized questionnaires that

extend to large number of respondents. This way the interviewer will easily collect

the data, compare and evaluate the responses. Next is the semi-structured interviews

(non-standardized), mostly used to collect qualitative data through list of topics and

questions that is linked to objectives of the study. Therefore the researcher was

aimed to use semi-structured open-ended questions to gain answers that reveal the

respondent view of the topic.

29

III.1.2.1. Interview Procedures

The interviews were made by telephone because Etek Cafe was far in

distance or suited the respondent best. The interviews were scheduled on

different days and we got the chance to improve our questions and

interviewing skills. Like every interview, the researcher begun with the

introduction and then carried on with the topics of the research and

questions. Some follow-up questions observed as necessary for the research

showed up through the interview process. For the menus and data of the

Etek Cafe, one of the management sent by email.

III.4. Data Processing

According to Garrison, Noreen, Brewer, Cheng and Yuen (2012:287-298),

there five steps of implementation activity based costing, as follows:

1) Define activities, activity cost pools and activity measures.

2) Assign overhead costs to activity cost pools.

3) Calculate activity rates.

4) Assign overhead costs to cost objects using the activity rates and activity

measures.

5) Prepare management reports.

III.5. Operational Variables

There are three operational variables in this research, which are direct

material, direct labor and factory overhead. According to Garrison, Noreen, Brewer,

Cheng and Yuan (2012:42) direct materials are those material that become an

30

integral part of the finished goods and whose cost can be conveniently traced to the

finished goods product.

According to Garrison, Noreen, Brewer, Cheng and Yuan (2012:42) direct

labor consists of labor costs that can be easily traced to individual units of product.

Direct labor is sometimes called touch labor because direct labor workers typically

touch the product while it is being made.

The last variable is factory overhead. According to Garrison, Noreen,

Brewer, Cheng and Yuan (2012:42) factory overhead or manufacturing overhead

includes all manufacturing costs except direct material and direct labor.

Manufacturing overhead includes items such as indirect materials, indirect labor,

maintenance and repairs on production equipment, heat and light, property taxes,

depreciation and insurance on manufacturing facilities.

31

CHAPTER IV

ANALYSIS OF DATA AND INTERPRETATION OF RESULT

IV.1. Data Analysis

IV.1.1. Production Costs

IV.1.1.1. Direct Materials Costs

Direct material is all material that can be traced directly into the

product and include in calculation of production cost. Since 2012 until now,

Etek Cafe used traditional method that leads to distortion and activity based

costing method claims that could be calculate the production cost accurately.

The researcher had been observed the activities of Etek Cafe directly

in Padang. There are several menus in Etek Cafe, but only five menus in

Etek Cafe that continuously being produced because the modern food not

attractive enough in Padang especially for college students. Therefore, the

researcher decided to conduct research only to five menus of Etek Cafe, as

follows

Table 4.1

Pricelist in Etek Cafe

No Products Price

1 Fried Rice Rp 10.000,00

2 Indomie Goreng Rp 9.000,00

3 Indomie Rebus Rp 9.000,00

4 Pecal Ayam Rp 18.000,00

5 Fried Kwetiau Rp 15.000,00

32

Based on the pricelist at table 4.1, the direct material costs incurred, as

follows:

Table 4.2

List of Direct Material Costs in Etek Cafe

Materials Costs incurred in 6

months

Rice Rp 54.720.000,00

Chicken Rp 170.208.000,00

Indomie Kari Ayam Rp 59.040.000,00

Indomie Goreng Rp 58.320.000,00

Kwetiaw Rp 10.800.000,00

Egg Rp 56.160.000,00

Carrot Rp 4.752.000,00

Tomato Rp 7.200.000,00

Cucumber Rp 4.032.000,00

Lettuce Rp 4.320.000,00

Chilli Rp 46.080.000,00

Royco Rp 2.016.000,00

Salt Rp 864.000,00

Chili Sauce Rp 15.120.000,00

Leek Rp 5.184.000,00

Red Onion Rp 8.064.000,00

Garlic Rp 3.456.000,00

Onion Rp 6.912.000,00

Celery Rp 2.880.000,00

Soy Sauce Rp 10.368.000,00

Cabbage Rp 1.728.000,00

Cayenne Pepper Rp 5.760.000,00

Total Rp537.984.000,00

33

The total of customer order based on the estimation of management during

the six months operation, as follows:

Table 4.3

List of Total Customer in Etek Cafe

No Food

Customer Orders

in 6 months

operation

1 Fried Rice 13.536

2 Indomie Goreng 6.912

3 Indomie Rebus 6.912

4 Pecal Ayam 23.040

5 Fried Kwetiau 4.320

TOTAL 54.720

According to the list of direct materials and the list of customers

order each products, the allocations of direct material as follows:

1) Fried Rice.

There are several materials needed to produce Fried Rice in Cafe

Etek and the total costs needed to purchase the materials for fried

rice in six months operation is Rp 65.988.140,24. The details of

direct materials for fried rice, as follows:

34

Table 4.4

List of Direct Material Costs of Fried Fried in Etek Cafe

Product Material Costs Total

Fried Rice Rice Rp 20.250.709

Egg Rp 13.892.211

Carrot Rp 1.175.495

Tomato Rp 1.781.053

Cucumber Rp 997.389

Lettuce Rp 1.068.632

Chilli Rp 11.398.737

Royco Rp 498.695

Salt Rp 213.726

Chilli Sauce Rp 3.740.211

Leek Rp 1.282.358

Red Onion Rp 1.994.779

Garlic Rp 854.905

Onion Rp 1.709.811

Celery Rp 712.421

Soy Sauce Rp 2.564.716

Cabbage Rp 427.453

Cayenne Pepper Rp 1.424.842

Rp 65.988.140

2) Indomie Goreng.

There are several materials needed to produce Indomie Goreng in

Cafe Etek and the total costs needed to purchase the materials for

indomie goreng in six months operation is Rp 81.675.284. The

details of direct materials for indomie goreng as follows:

35

Table 4.5

List of Direct Material Costs of Indomie Goreng in Etek Cafe


Indomie Goreng Indomie Goreng Rp 58.320.000

Egg Rp 7.093.895

Carrot Rp 600.253

Tomato Rp 909.474

Cucumber Rp 509.305

Lettuce Rp 545.684

Chilli Rp 5.820.632

Royco Rp 254.653

Salt Rp 109.137


Leek Rp 654.821


Garlic Rp 436.547

Onion Rp 873.095

Celery Rp 363.789


Cabbage Rp 218.274

Cayenne Pepper Rp 727.579

Rp 81.675.284

3) .Indomie Rebus.

There are several materials needed to produce Indomie Rebus in

Cafe Etek and the total costs needed to purchase the materials for

indomie rebus in six months operation is Rp 82.395.284. The details

of direct materials for indomie rebus as follows:

36

Table 4.6

List of Direct Material Costs of Indomie Rebus in Etek Café


Indomie Rebus Indomie Rebus Rp 59.040.000

Egg Rp 7.093.895

Carrot Rp 600.253

Tomato Rp 909.474

Cucumber Rp 509.305

Lettuce Rp 545.684

Chilli Rp 5.820.632

Royco Rp 254.653

Salt Rp 109.137


Leek Rp 654.821


Garlic Rp 436.547

Onion Rp 873.095

Celery Rp 363.789


Cabbage Rp 218.274


Rp 82.395.284

4) Pecel Ayam.

There are several materials needed to produce Pecel Ayam in Cafe

Etek and the total costs needed to purchase the materials for pecel

ayam in six months operation is Rp 282.528.239. The details of

direct materials for pecel ayam as follows:

37

Table 4.7

List of Direct Material Costs of Pecel Ayam in Etek Cafe


Pecel Ayam Rice Rp 34.469.291

Egg Rp 23.646.316

Chicken Rp 170.208.000

Carrot Rp 2.000.842

Tomato Rp 3.031.579

Cucumber Rp 1.697.684

Lettuce Rp 1.818.947

Chilli Rp 19.402.105

Royco Rp 848.842

Salt Rp 363.789


Leek Rp 2.182.737


Garlic Rp 1.455.158

Onion Rp 2.910.316

Celery Rp 1.212.632


Cabbage Rp 727.579

Cayenne Pepper Rp 2.425.263

Rp 282.528.239

5) Fried Kwetiau.

There are several materials needed to produce Fried Kwetiau in Cafe

Etek and the total costs needed to purchase the materials for fried

kwetiau in six months operation is Rp 21.418.105. The details of

direct materials for fried kwetiau as follows:

38

Table 4.8

List of Direct Material Costs of Fried Kwetiau in Etek Cafe


Kwetiau Goreng Kwetiau Rp 10.800.000

Egg Rp 454.737

Carrot Rp 375.158

Tomato Rp 568.421

Cucumber Rp 318.316

Lettuce Rp 341.053

Chilli Rp 3.637.895

Royco Rp 159.158

Salt Rp 68.211


Leek Rp 409.263

Red Onion Rp 636.632

Garlic Rp 272.842

Onion Rp 545.684

Celery Rp 227.368

Soy Sauce Rp 818.526

Cabbage Rp 136.421


Rp 21.418.105

IV.1.1.2. Direct Labor Costs

Direct labor is all labor that directly performs the conversion process

of raw material into finished goods and include the compensation of all

manufacturing labor that can be traced to the cost of object. The direct labor

costs in Etek Cafe Padang, as follows

39

Table 4.9

List of Direct Labor Costs in Etek Cafe

Labor Salaries in a day Salaries in 6

months

1 Rp 60.000,00 Rp 8.640.000,00

2 Rp 55.000,00 Rp 7.920.000,00

3 Rp 55.000,00 Rp 7.920.000,00

4 Rp 55.000,00 Rp 7.920.000,00

5 Rp 55.000,00 Rp 7.920.000,00

Total Rp 280.000,00 Rp 40.320.000,00

IV.1.1.3. Factory Overhead Costs

The last element of prodiction cost is factory overhead costs.

According to Horngren, Datar and Foster (2012:35) factory overhead costs

is all costs that incurred to produce the products and services but cannot be

traced directly into the products and services.

According to Garrison, Noreen, Brewer, Cheng and Yuen (2012:287-

298), there five steps of implementation activity based costing, as follows:

1) Define activities, activity cost pools and activity measures.

Activities incurred in Etek Cafe in order to produce food, as follows:

a) Purchasing raw material.

b) Record customer order.

c) Cooking.

d) Plating.

e) Delivery the products.

f) Cleaning.

40

g) Other overhead costs.

Based on the activities aboves, the researcher concluded the details

of factory overhead of Etek cafe in six months operations at table

4.10, as follows:

Table 4.10

List of Factory Overhead Cost in Etek Cafe

Factory Overhead List

Waitress Salaries Rp 21.600.000,00

Cleaning Services

Salaries Rp 12.960.000,00

Maintenance Costs Rp 3.000.000,00

Depreciation Cost:

Stoves Rp 416.666,67

Electric Fan Rp 562.500,00

Frying Pan Rp 250.000,00

Rice Cooker Rp 1.150.000,00

Building Rp 500.000,00 Rp 5.879.166,67

Transportation Cost

Fuel Rp 4.800.000,00

Parking Fee Rp 288.000,00

Rp 5.088.000,00

Paper Rp 576.000,00

Ink Rp 600.000,00

Gas Elpiji Rp 25.920.000,00

Oil Rp 15.840.000,00

Plate Rp 3.000.000,00

Fork Rp 72.000,00

Spoon Rp 72.000,00

Water Rp 7.200.000,00

Electricity Rp 14.400.000,00

Broom Rp 480.000,00

Bucket Rp 500.000,00

Pen Rp 600.000,00

Sunlight Rp 1.008.000,00

41

Sweep Mop Rp 480.000,00

Total Rp 116.275.166,67

2) Assign overhead costs to activity cost pools.

The next step is assign the factory overhead cost in the first step into

each cost pools. The activity cost pools of Etek cafe in six months

operastions, as follows:

Table 4.11

Activity Cost Pools in Etek Cafe

No Activities Cost Total

Batch Level Activities Costs

1 Purchasing Raw Material

Fuel Rp 4.800.000,00

Parking Fee Rp 288.000,00 Rp 5.088.000,00

2 Recording Customer Order

Paper Rp 576.000,00

Ink Rp 600.000,00

Pen Rp 600.000,00 Rp 1.776.000,00

3 Cooking Process

Gas Elpiji Rp 25.920.000,00

Oil Rp 15.840.000,00

Water Rp 7.200.000,00

Electricity Rp 14.400.000,00 Rp 63.360.000,00

4 Plating

Plate Rp 3.000.000,00

Fork Rp 72.000,00

Spoon Rp 72.000,00 Rp 3.144.000,00

5 Delivery The Product

Waitress Salaries Rp 21.600.000,00 Rp 21.600.000,00

42

6 Cleaning Process

Cleaning Services Salaries Rp 12.960.000,00

Broom Rp 480.000,00

Bucket Rp 500.000,00

Sunlight Rp 1.008.000,00

Sweep Mop Rp 480.000,00 Rp 15.428.000,00

Rp 110.396.000,00

Facility Sustaining

Activities Costs

1 Maintenance Costs Rp 3.000.000,00

2 Depreciation Cost Rp 2.879.166,67

Rp 5.879.166,67

Rp 116.275.166,67

3) Calculate activity rates.


Purchasing raw material are consists of purchasing fuel and

parking fee. Overhead rate in purchasing raw material is

based on how many times management purchase raw

materials in six month in Etek Cafe, as follows:

𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑖𝑛𝑔 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠: Rp 5.088.000,00

288

= Rp 17.666,67/km

The range between market and Etek Cafe is 3 km and total

purchasing material overhead rate is :

𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑖𝑛𝑔 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠: Rp 53.000,00

54720

= Rp 0.96/order

b) Recording customer order.

Recording customer orders are consists of paper, ink and pen.

Overhead rate in recording customer orders is based on the

43

total customer orders in six months operation in Etek Cafe, as

follows:

𝑟𝑒𝑐𝑜𝑟𝑑𝑖𝑛𝑔 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑜𝑟𝑑𝑒𝑟𝑠: Rp 1.776.000,00

54720

= Rp 32,46/order

c) Cooking.

Cooking are consists of purchasing gas elpiji, water, oil and

electricity. Overhead rate in cooking is based on total

customer orders in six months operation in Etek Cafe, as

follows:

𝑐𝑜𝑜𝑘𝑖𝑛𝑔 𝑝𝑟𝑜𝑐𝑒𝑠𝑠: Rp 63.360.000,00

54720

= Rp 1.157,89/order

d) Plating.

Plating are consists of plate, fork and spoon. Overhead rate in

plating is based on the total customer orders in six months

operation in Etek Cafe, as follows:

𝑝𝑙𝑎𝑡𝑖𝑛𝑔: Rp 3.144.000,00

54720= Rp 57,46/order

e) Delivery the product.

Delivery the product is consists of waitress saleries.

Overhead rate in delivery the product is based on the total

customer order in six months operation in Etek Cafe, as

follows:

𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑡ℎ𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑡: Rp 21.600.000,00

54720

= Rp 394,74/order

44

f) Cleaning.

Cleaning are consists of cleaning services saleries, broom,

bucket, sunlight and sweep mop. Overhead rate in cleaning is

based on the total customer orders in six months operation in

Etek Cafe, as follows:

𝑐𝑙𝑒𝑎𝑛𝑖𝑛𝑔: Rp 15.428.000,00

54720= Rp 281,94/order


Other overhead costs are consists of maintanance costs and

depreciation costs. Overhead rate in recording other overhead

costs is based on building area (150m2) in Etek Cafe, as

follows:

𝑜𝑡ℎ𝑒𝑟 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡𝑠: 150m2

2700𝑚2× 5.879.166,67

= 𝑅𝑝 326.620,37/𝑚2

Allocation overhead cost to each products:

𝑜𝑡ℎ𝑒𝑟 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡𝑠:326.620,37

54720= 𝑅𝑝 5,97/𝑜𝑟𝑑𝑒𝑟

4) Assign overhead costs to cost objects using the activity rates and

activity measures.


Purchasing raw material consists of fuel and parking fee.

Cost driver in purchasing raw material is based on customer

orders on each products in six months operation in Etek Cafe,

as follows:

45

Table 4.12

Cost Driver of Purchasing Activity in Etek Cafe

Products Cost

Driver

Unit

Driver Total

Fried Rice Rp0,96 13.536 Rp12.994,56

Indomie Goreng Rp0,96 6.912 Rp6.635,52

Indomie Rebus Rp0,96 6.912 Rp6.635,52

Pecel Ayam Rp0,96 23.040 Rp22.118,40

Fried Kwetiau Rp0,96 4.320 Rp4.147,20

b) Recording customer orders.

Recording customer orders are consists of paper, ink and pen.

Cost driver in recording customer orders is based on

customer orders on each products in six months operation in


Table 4.13

Cost Driver of Recording Customer Orders in Etek Cafe

Products Cost

Driver Unit Driver Total

Fried Rice Rp 32,46 13.536 Rp 439.326,32

Indomie Goreng Rp 32,46 6.912 Rp 224.336,84

Indomie Rebus Rp 32,46 6.912 Rp 224.336,84

Pecel Ayam Rp 32,46 23.040 Rp 747.789,47

Fried Kwetiau Rp 32,46 4.320 Rp 140.210,53

c) Cooking.

Cooking are consists of purchasing gas elpiji, water, oil and

electricity. Cost driver in cooking process is based on

46

customer orders on each products in six months operation in


Table 4.14

Cost Driver of Cooking in Etek Cafe

Products Cost Driver

Unit

Driver Total

Fried Rice Rp 1.157,89 13.536 Rp 15.673.263,16

Indomie Goreng Rp 1.157,89 6.912 Rp 8.003.368,42

Indomie Rebus Rp 1.157,89 6.912 Rp 8.003.368,42

Pecel Ayam Rp 1.157,89 23.040 Rp 26.677.894,74

Fried Kwetiau Rp 1.157,89 4.320 Rp 5.002.105,26

d) Plating.

Plating are consists of plate, fork and spoon. Cost driver in

plating is based on customer orders on each products in six

months operation in Etek Cafe, as follows:

Table 4.15

Cost Driver of Plating in Etek Café

Products

Cost

Driver

Unit

Driver Total

Fried Rice Rp 57,46 13.536 Rp 777.726,32

Indomie Goreng Rp 57,46 6.912 Rp 397.136,84

Indomie Rebus Rp 57,46 6.912 Rp 397.136,84

Pecel Ayam Rp 57,46 23.040 Rp1.323.789,47

Fried Kwetiau Rp 57,46 4.320 Rp 248.210,53

e) Delivery The Products.

Delivery the product is consists of waitress saleries. Cost

driver in delivery the product is based on customer orders on

47

each products in six months operation in Etek Cafe, as

follows:

Table 4.16

Cost Driver of Delivery The Products in Etek Cafe

Products

Cost

Driver

Unit

Driver Total

Fried Rice Rp394,74 13.536 Rp5.343.157,89

Indomie Goreng Rp394,74 6.912 Rp2.728.421,05

Indomie Rebus Rp394,74 6.912 Rp2.728.421,05

Pecel Ayam Rp394,74 23.040 Rp9.094.736,84

Fried Kwetiau Rp394,74 4.320 Rp1.705.263,16

f) Cleaning.

Cleaning are consists of cleaning services saleries, broom,

bucket, sunlight and sweep mop. Cost driver in cleaning is

based on customer orders on each products in six months


Table 4.17

Cost Driver of Cleaning in Etek Cafe

Products Cost

Driver

Unit

Driver Total

Fried Rice Rp281,94 13.536 Rp3.816.400,00

Indomie Goreng Rp281,94 6.912 Rp1.948.800,00

Indomie Rebus Rp281,94 6.912 Rp1.948.800,00

Pecel Ayam Rp281,94 23.040 Rp6.496.000,00

Fried Kwetiau Rp281,94 4.320 Rp1.218.000,00

48


Other overhead costs are consists of maintanance costs and

depreciation costs. Overhead rate in recording other overhead

costs is based on the total customer orders in six months


Table 4.18

Cost Driver of Other Overhead Costs in Etek Cafe

Products Cost

Driver

Unit

Driver Total

Fried Rice Rp5,97 13.536 Rp 1.454.307,84

Indomie Goreng Rp5,97 6.912 Rp 742.625,28

Indomie Rebus Rp5,97 6.912 Rp 742.625,28

Pecel Ayam Rp5,97 23.040 Rp2.475.417,60

Fried Kwetiau Rp5,97 4.320 Rp 464.140,80

5) Prepare the management report.

a) Fried Rice.

Table 4.19

Total of Factory Overhead Costs of Fried Rice Using ABC Method

No Activities Total Cost

1 Purchasing Raw Materials Rp 12.994,56

2 Recording Customer Orders Rp 439.326,32

3 Cooking Rp15.673.263,16

4 Plating Rp 777.726,32

5 Delivery The Products Rp 5.343.157,89

6 Cleaning Rp 3.816.400,00

7 Other Overhead Costs Rp 80.809,92

Total Factory Overhead Cost Rp26.143.678,17

49

The activities incurred in calculating factory overhead costs

are purchasing raw materials, recording customer orders,

cooking, plating, delivery the products, cleaning and other

overhead costs. Total factory overhead costs of Fried Rice in

Etek Cafe is Rp 26.143.678,17.

b) Indomie Goreng.

Table 4.20

Total of Factory Overhead Costs of Indomie Goreng Using ABC Method




3 Cooking Rp 8.003.368,42

4 Plating Rp 397.136,84


6 Cleaning Rp 1.948.800,00






overhead costs. Total factory overhead costs of Indomie

Goreng in Etek Cafe is Rp13.343.327,79.

50

c) Indomie Rebus.

Table 4.21

Total of Factory Overhead Costs of Indomie Rebus Using ABC Method




3 Cooking Rp 8.003.368,42

4 Plating Rp 397.136,84


6 Cleaning Rp 1.948.800,00






overhead costs. Total factory overhead costs of Indomie

Rebus in Etek Cafe is Rp 13.343.327,79.

d) Pecel Ayam.

Table 4.22

Total of Factory Overhead Costs of Pecel Ayam Using ABC Method




3 Cooking Rp26.677.894,74

4 Plating Rp 1.323.789,47


6 Cleaning Rp 6.496.000,00



51




overhead costs. Total factory overhead costs of Pecel Ayam

in Etek Cafe is Rp 44.499.877,72.

e) Fried Kwetiau.

Table 4.23

Total of Factory Overhead Costs of Fried Kwetiau Using ABC Method




3 Cooking Rp5.002.105,26

4 Plating Rp 248.210,53

5 Delivery The Products Rp1.705.263,16

6 Cleaning Rp1.218.000,00

7 Other Overhead Cost Rp 25.790,40





overhead costs. Total factory overhead costs of Fried

Kwetiau in Etek Cafe is Rp 8.343.727,08.

52

IV.2. Result of Activity Based Costing Method.

Table 4.24

Calculation of Production Costs Using Activity Based Costing Method

Unit Products Direct

Materials Direct Labor

Factory

Overhead

Total

Production Cost Price/Unit

13.536 Fried Rice 65.988.140,00 9.973.894,74 26.143.678,17 102.105.712,91 Rp 7.543,27

6.912 Indomie

Goreng 81.675.284,00 5.093.052,63 13.343.327,79 100.111.664,42 Rp14.483,75

6.912 Indomie

Rebus 82.395.284,00 5.093.052,63 13.343.327,79 100.831.664,42 Rp14.587,91

23.040 Pecel Ayam 282.528.239,00 16.976.842,11 44.499.877,72 344.004.958,83 Rp14.930,77

4.320 Fried

kwetiau 21.418.105,00 3.183.157,89 8.343.727,08 32.944.989,97 Rp 7.626,16

The table above is the result of production costs per unit using

activity based costing. There three elements of production costs; direct

material, direct labor and factory overhead. First is Fried Rice. The total

production costs fried rice is 102.105.712,91 and the next step is compute

the unit price by the total production costs divided by 13.536 unit driver of

fried rice. The production costs per unit for fried rice using activity based

costing is Rp 7.543,27 per unit.

Second is Indomie Goreng. The total production costs indomie

goreng is Rp 100.111.664,42 and the next step is compute the unit price by

the total production costs divided by 6.912 unit driver of indomie goreng.

The production costs per unit for indomie goreng using activity based

costing is Rp 14.483,75 per unit.

53

Third is Indomie Rebus. The total production costs indomie rebus is

Rp 100.831.664,42 and the next step is compute the unit price by the total

production costs divided by 6.912 unit driver of indomie rebus. The

production costs per unit for indomie rebus using activity based costing is

Rp 14.587,91 per unit.

Fourth is Pecel Ayam. The total production costs pecel ayam is Rp

344.004.958,83 and the next step is compute the unit price by the total

production costs divided by 23.040 unit driver of pecel ayam. The

production costs per unit for pecel ayam using activity based costing is Rp

14.930,77 per unit.

The last is Fried Kwetiau. The total production costs fried kwetiau is


production costs divided by 4.320 unit driver of fried kwetiau. The

production costs per unit for fried kwetiau using activity based costing is Rp

Rp7.626,16 per unit.

IV.3.Calculation of Traditional Method

The estimation of factory overhead occured 6 months operation

based on the management calculation using traditional method is Rp

110.396.000,00. According to the estimation of factory overhead, the factory

overhead rate, as follows:

𝑓𝑎𝑐𝑡𝑜𝑟𝑦 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑟𝑎𝑡𝑒 =Rp 110.396.000,00

54720= Rp 2.017,47

54

The allocations of factory overhead into each product, as follows:

1) Fried Rice

Table 4.25

Total of Factory Overhead Costs of Fried Rice Using Traditional Method

Unit Factory Overhead Rate Factory Overhead Costs

13536 Rp 2.017,47 Rp 27.308.484,21

2) Indomie Goreng

Table 4.26

Total of Factory Overhead Costs of Indomie Goreng Using Traditional Method


6912 Rp 2.017,47 Rp 13.944.757,89

3) Indomie Rebus

Table 4.27

Total of Factory Overhead Costs of Indomie Rebus Using Traditional Method


6912 Rp 2.017,47 Rp 13.944.757,89

4) Pecel Ayam

Table 4.28

Total of Factory Overhead Costs of Pecel Ayam Using Traditional Method


23040 Rp 2.017,47 Rp 46.482.526,32

55

5) Fried Kwetiau

Table 4.29

Total of Factory Overhead Costs of Fried Kwetau Using Traditional Method

Unit

Factory Overhead

Rate

Factory Overhead

Costs

4320 Rp 2.017,47 Rp 8.715.470,40

The last step in traditional method is calculating the production cost

per unit, as follows:

Table 4.30

Calculation of Production Costs Using Traditional Method

Unit Products Direct Materials Direct Labor Factory

Overhead

Total

Production Cost Price/Unit

13.536 Fried Rice 65.988.140,00 9.973.894,74 27.308.484,21 103.270.518,95 Rp 7.629,32

6.912 Indomie

Goreng 81.675.284,00 5.093.052,63 13.944.757,89 100.713.094,52 Rp14.570,76

6.912 Indomie

Rebus 82.395.284,00 5.093.052,63 13.944.757,89 101.433.094,52 Rp14.674,93

23.040 Pecel

Ayam 282.528.239,00 16.976.842,11 46.482.526,32 345.987.607,43 Rp15.016,82

4.320 Fried

kwetiau 21.418.105,00 3.183.157,89 8.715.470,40 33.316.733,29 Rp 7.712,21

The table above is the result of production costs per unit using

traditional method. There three elements of production costs; direct material,

direct labor and factory overhead. First is Fried Rice. The total production

costs fried rice is Rp 103.270.518,95 and the next step is compute the unit

price by the total production costs divided by 13.536 unit driver of fried rice.

56

The production costs per unit for fried rice using traditional method is Rp

7.629,32 per unit.

Second is Indomie Goreng. The total production costs indomie

goreng is Rp 100.713.094,52 and the next step is compute the unit price by

the total production costs divided by 6.912 unit driver of indomie goreng.

The production costs per unit for indomie goreng using traditional method is

Rp 14.570,76 per unit.

Third is Indomie Rebus. The total production costs indomie rebus is


production costs divided by 6.912 unit driver of indomie rebus. The

production costs per unit for indomie rebus using traditional method is Rp

14.674,93 per unit.

Fourth is Pecel Ayam. The total production costs pecel ayam is Rp


production costs divided by 23.040 unit driver of pecel ayam. The

production costs per unit for pecel ayam using traditional method is Rp

15.016,82 per unit.

The last is Fried Kwetiau. The total production costs fried kwetiau is


production costs divided by 4.320 unit driver of fried kwetiau. The

production costs per unit for fried kwetiau using traditional method is Rp

7.712,21 per unit.

57

IV.4. Differences of Activity Based Costing Method and Traditional Method’s Results

Table 4.31

Differences of Activity Based Costing Method and Traditional Method’s Results

No Products Traditional

Method

Activity

Based

Costing

Method

Differences Result

1 Fried Rice Rp7.629,32 Rp7.543,27 Rp86,05 over-cost

2 Indomie

Goreng Rp14.570,76 Rp14.483,75 Rp87,01 over-cost

3 Indomie

Rebus Rp14.674,93 Rp14.587,91 Rp87,02 over-cost

4 Pecel Ayam Rp15.016,82 Rp14.930,77 Rp86,05 over-cost

5 Fried

Kwetiau Rp7.712,21 Rp7.626,16 Rp86,05 over-cost

The table above is the result of total production costs per unit using

traditional method and activity based method. There three elements of

production cost; direct material, direct labor and factory overhead.

According to the table 4.31, Fried Rice, Indomie Goreng, Indomie Rebus,

Pecel Ayam and Fried Kwetiau are over-cost. In other words, the production

costs per unit using activity based costing is higher than traditional method

about Rp 86,05.

58

IV.5. Pricing Decision using Traditional Method and Activity Based Costing Method

Table 4.32

Pricing Decision Using Traditional Method in Etek Cafe

Profit 25% Products Traditional Method price after profit

25% Fried Rice Rp 7.629,32 Rp 9.536,65

25% Indomie Goreng Rp14.570,76 Rp18.213,45

25% Indomie Rebus Rp14.674,93 Rp18.343,66

25% Pecel Ayam Rp15.016,82 Rp18.771,03

25% Fried Kwetiau Rp 7.712,21 Rp 9.640,26

Result of pricing decision using traditional method in Etek Cafe after profit,

as follows:

1) The first menu is Fried Rice. The price per unit of Fried Rice after

twenty five percents profit is Rp 9.536,65 meanwhile the

management already set the price of Fried Rice is Rp 10.000,00. It

means, the management get profit more than twenty five percents per

unit.

2) The second menu is Indomie Goreng. The price per unit of Indomie

Goreng after twenty five percents profit is Rp 18.213,45, meanwhile

the management already set the price of Indomie Goreng is Rp

9.000,00. It means, the management get loss about Rp 9.213,45 each

unit.

59

3) The third menu is Indomie Rebus. The price per unit of Indomie

Rebus after twenty five percents profit is Rp 18.343,66, meanwhile

the management already set the price of Indomie Rebus is Rp


unit.

4) The fourth menu is Pecel Ayam. The price per unit of Pecel Ayam

after twenty five percents profit is Rp 18.771,03, meanwhile the

management already set the price of Pecel Ayam is Rp 18.000,00. It

means, the management get profit about Rp 771,03 each unit.

5) The fifth menu is Fried Kwetiau. The price per unit of Fried Kwetiau


management already set the price of Fried Kwetiau is Rp Rp

15.000,00. It means, the management already gain more than twenty

five percents of profit about Rp 5.359,74 each unit.

Table 4.33

Pricing Decision Using Activity Based Costing Method in Etek Cafe

Profit 25% Products Activity Based

Costing Method Price After Profit

25% Fried Rice Rp 7.543,27 Rp 9.429,09

25% Indomie Goreng Rp14.483,75 Rp18.104,68

25% Indomie Rebus Rp14.587,91 Rp18.234,89

25% Pecel Ayam Rp14.930,77 Rp18.663,46

25% Fried Kwetiau Rp 7.626,16 Rp 9.532,69

60

Result of pricing decision using activity based costing in Etek Cafe after

profit, as follows:

1) The first menu is Fried Rice. The price per unit of Fried Rice after

twenty five percents profit is Rp 9.429,09, meanwhile the

management already set the price of Fried Rice is Rp 10.000,00. It

means, the management get profit more than twenty five percents per

unit.

2) The second menu is Indomie Goreng. The price per unit of Indomie

Goreng after twenty five percents profit is Rp 18.104,68, meanwhile

the management already set the price of Indomie Goreng is Rp


unit.

3) The third menu is Indomie Rebus. The price per unit of Indomie

Rebus after twenty five percents profit is Rp 18.234,89, meanwhile

the management already set the price of Indomie Rebus is Rp


unit.

4) The fourth menu is Pecel Ayam. The price per unit of Pecel Ayam


management already set the price of Pecel Ayam is Rp 18.000,00. It

means, the management get profit about Rp 663,46 each unit.

5) The fifth menu is Fried Kwetiau. The price per unit of Fried Kwetiau

after twenty five percents profit is 9.532,69, meanwhile the

management already set the price of Fried Kwetiau is Rp Rp

61

15.000,00. It means, the management already gain more than twenty

five percents of profit about Rp 5.467,31 each unit.

Table 4.34

Differences of Pricing Decision Using Traditional Method and Activity Based Costing

in Etek Cafe

Traditional Method Activity Based

Costing Method Differences Result

Rp9.536,65 Rp 9.429,09 Rp107,57 over-cost

Rp18.213,45 Rp18.104,68 Rp108,77 over-cost

Rp18.343,66 Rp18.234,89 Rp108,77 over-cost

Rp18.771,03 Rp18.663,46 Rp107,57 over-cost

Rp9.640,26 Rp 9.532,69 Rp107,57 over-cost

According to the table 4.34 above, there are under costs for Fried

Rice, Indomie Goreng, Indomie Rebus, Pecel Ayam and Fried Kwetiau. The

researcher had been conducted the interview regarding the pricing using

activity based costing method after profit, the results as follows:

1) The price of Indomie Goreng and Indomie Rebus are Rp

18.104,68 and Rp 18.234,89. According to the management point

of view, those prices are too high for noodle and also too high

comparing with the competitors. The competitors are set the price

of Indomie Rebus and Indomie Goreng about Rp 10.000,00. The

best price of Indomie Goreng and Indomie Rebus according to

management decision is Rp 10.000,00.

62

2) For Fried Rice, Pecel Ayam and Fried Kwetiau, management

decides to set the price as same as the competitors to cover the

loss due to Indomie Goreng and Indomie Rebus. The price of

Fried Rice, Pecel Ayam and Fried Kwetiau using activity based

costing are Rp 9.429,09, Rp 18.663,46 and Rp 9.532,69.

Meanwhile, the prices set by competitors are Rp 15.000,00, Rp

20.000,00 and Rp 18.000,00. At the end, if the management

choose to set price same as the competitor, total profit is Rp

14.649,16 and still not enough to cover up loss from Indomie

Goreng and Indomie Rebus.

3) Regarding the loss, there are some non added value of Indomie

Goreng and Indomie Rebus that create waste and add costs to the

products such as carrot, oil, royco, salt, and cucumber. Those

materials are needed for Indomie Goreng and Indomie Rebus

because Etek Cafe makes both menus with its own recipe. Since

the main customers are students, the managements said they have

two plans, as follows:

a) Keep the non added value materials, still serve the menus

with special recipe, change the price with activity based

costing after result and waiting for the reaction of the

customers.

b) Reduce the cost of Indomie Goreng and Indomie Rebus by

not using the non added value material and serve the menus

like other competitors.

63

CHAPTER V

CONCLUSION AND RECOMMENDATION

V.1. Conclusion

This study is aimed to help the management of Etek Cafe in Padang in

pricing decision using the activity based costing method. The researcher directly

conducted the observation started from the purchasing material of the product until

the product are being sold. Since May 2012, the management used the traditional

method for pricing decision and other consideration such as competitor and the

ability of the customer to pay the products. According to the research that had been

done, the result of this study, as follows:

1. There are over cost of prices per unit using traditional method and

activity based costing before profit around Rp 86,05 and Rp 87,02 for

Fried Rice, Indomie Goreng, Indomie Rebus, Pecel Ayam and Fried

Kwetiau.

2. There are under cost of prices per unit using traditional method and

activity based costing after profit about Rp 107,57 and Rp 108,77 for

Fried Rice, Indomie Goreng, Indomie Rebus, Pecel Ayam and Fried

Kwetiau.

3. Etek Cafe get loss on Indomie Rebus and Indomie Goreng because there

are some non value added in both menus such as carrot, oil, royco, salt,

and cucumber caused by the process making of Indomie Goreng and

Indomie Rebus with special recipe.

64

V.2. Recommendation

According to Horngren,Datar and Foster (2006:398) there are some factors

that influence pricing decision such as customers, costs and competitor. This

research was limited to analyze costs to help management of Etek Cafe for pricing

decision. Therefore, future research may add another factors that influence pricing

decision. In addition, the future research may add not only foods but also drinks and

another menus to help the management of company for pricing decision as a whole.

The future research may also compare two cafes in different cities but in same

product to conduct research deeper.

For the management of Etek Cafe in Padang, this research may give them an

important information regarding pricing decision. The pricing decision is critically

needed in order to maintain the financial health of the company. This research

brings a literature and practical contribution towards the pricing decision using the

activity based costing method. Hopefully, it will enrich the knowledge regarding the

issue of pricing decision using traditional method and activity based costing

method.

65

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68

69

APPENDIX I

Fried Rice Indomie Rebus

Indomie Goreng Pecel Ayam

Fried Kwetiau

70

APPENDIX II

71

APPENDIX III

Documents

THE IMPLEMENTATION OF ACTIVITY BASED COSTING 1 FOR …