When you run a simulation, SIMPROCESS will pause at the end of each cost period to calculate the period costs. SIMPROCESS tracks all the activities that used the resource and all of the types of entities processed in those activities. For each resource that has specified costs and that is set to calculate costs, SIMPROCESS will distribute the resource's fixed and variable costs for the period to all of the activities that made use of the resource during the period. This distribution is based on the amount of the available capacity used by the activity during the period. For example, suppose that a resource is used evenly by two activities, and the resource was busy 50% of the time for the cost period. Further, suppose that during the period each activity processed five entities, two of type A and three of type B. SIMPROCESS will calculate the costs for this period as follows.
1. Calculate the variable costs for each resource based on the number of entities processed and the processing times as described.
2. For each of the two resources, calculate the portion of fixed cost represented by idle time. Then calculate both the fully absorbed and capacity based fixed costs. (In this case, the fully absorbed costs should be twice the capacity costs since the resource was 50% idle during the period.)
3. Add the variable costs to the fully absorbed costs and the capacity based costs, creating two period costs for each resource.
4. Divide the period costs for the resource based on the usage by activities. (In this case, the period costs will be split evenly between the two activities.)
In general, these steps are completed for all resources in the model that are set to calculate costs. In this manner, each activity accumulates its period costs from all of the resources that it actually made use of during the period. Next, SIMPROCESS will calculate the entity costs based on these activity costs. After all resource costs are distributed to the activities, the activity costs are then distributed to each type of entity processed by the activity, based on the total number of entities processed. These calculation proceed as follows:
1. The activity determines the total number of entities process for the period and the portion of this total represented by each type.
2. The activity costs are apportioned to the entities based on the number of each entity type divided by the total number of entities.
Upon completion of these calculations, SIMPROCESS will resume the simulation for the next cost period.
Go to Activity-Based Costing