ACC221ch08sp08

ACC221ch08sp08 - ACC221 Chapter 8 Activity Based Costing: A...

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1 ACC221 Chapter 8 Activity Based Costing: A Tool to Aid Decision Making 2 Objectives 1. Understand activity-based costing and how it differs from a traditional costing system. 2. Assign costs to cost pools using a first- stage allocation. 3. Compute activity rates for cost pools.
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3 Objectives 4. Assign costs to a cost object using a second-stage allocation. 5. Prepare a report show activity-based costing margins from an activity view. 6. Compare product costs computed using traditional and activity-based costing methods. 4 Objective 1 Understand activity-based costing and how it differs from a traditional costing system.
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5 Activity Based Costing A costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore fixed as well as variable costs. Can be used as a supplemental system. 6 Activity Based Costing 1. Nonmanufacturing as well as manufacturing costs may be assigned to products. 2. Some manufacturing costs may be excluded from product costs. 3. A number of overhead cost pools are used, each of which is allocated to products and other cost objects using its own unique measure of activity. 4. The allocation bases often differ from those used in traditional costing systems. 5. The overhead rates, or activity rates, may be based on the level of activity at capacity rather than on the budgeted level of activity.
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7 Activities Activity – any event that causes the consumption of overhead resources. Costs of activities are assigned to the products that cause the activities. 8 Costs of Idle Capacity in Activity-Based Costing Charges products for the cost of capacity used.
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This note was uploaded on 06/09/2008 for the course ACC 221 taught by Professor Tribunella during the Spring '08 term at Rochester.

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ACC221ch08sp08 - ACC221 Chapter 8 Activity Based Costing: A...

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