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Activity Based Costing (4).pdf - ORINE MARY GRACE M. COA...

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ORINE MARY GRACE M.COA BLK 1BACTIVITY BASED COSTINGTraditional costing-Broad averaging or peanut butter costing describes a costing approach thatuses broad averages for assigning the cost of resources uniformly to costobjects whom the individual products or services, in fact, use thoseresources in non-uniform ways.Undercosting and Overcosting-If a company undercosts one product, it will overcost at least one of itsproducts-Product undercosting happens when a product consumes high level ofresources but it is reported to a lower cost per unit.-Product overcosting happens when a product consumes low level ofresources but it is reported to a higher cost per unit.Activity Based Costing-Allocates overhead costs to multiple activity cost pools and assigns theactivity cost pools to product by means of cost drivers.Cost Driver-A factor that causes change in the cost pool for a particular activity. It isused as a basis for cost allocation any factor of activity that has directcause-effect relationship.

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Term
Spring
Professor
N/A
Tags
individual products

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