An International Meeting of the American Accounting Association 2005 Annual Meeting August 7–10, 2005 San Francisco, California Come to the City by the Bay!

Effective Learning Strategies Forum
Monday, August 8, 2005

Session 22
Activity-Based Costing: The Zoo Example

Presenters:
Violet C. Rogers, Stephen F. Austin State University
Aileen Smith, Stephen F. Austin State University

Description:
Activity-Based Costing and the use of appropriate drivers is a concept that is often difficult for students to understand. The Zoo Example uses a veterinarian’s salary to illustrate appropriate/inappropriate choices of drivers and the resulting inappropriate cost allocation. Most students have visited a zoo and have a working knowledge of the number and weight of birds as compared to the number and weight of elephants contained in a zoo. The class has fun using their common knowledge to determine if number of animals is an appropriate driver, if weight of animals is an appropriate driver, or if number of calls made to by the veterinarian is more appropriate.

The Example uses common classifications and actual animal weights to wildly allocate almost all of the veterinarian salary to birds while allocating very little to large mammals and vice versa. Students quickly understand errors of their choices and begin thinking as to how to appropriately allocate the salary. Always, students come up with an appropriate allocation on their own. They usually settle on number of calls made to particular animal types. The example also uses information separation associated with segment reporting as a background.

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