ACIS_2116_Chap8_Slides_no_blanks_Day_1

ACIS_2116_Chap8_Slides_no_blanks_Day_1 - Activity-Based...

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1 Activity-Based Costing: A Tool to Aid Decision Making Chapter Eight
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2 Test 2 Monday, March 26 at 7:00 pm Same location as Test 1 Bring a picture ID No cell phones allowed Covers Chapters 5-first part of 8 (p. 313-324) Similar format to Test 1 – approx. 60 objective questions Bring a calculator – simple, non-
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3 Test 2 Approximately 34 of the 60 questions involve calculations ABC costing questions are conceptual on test 2 Review Session Sunday, March 25 from 6 pm to 8 pm McBryde 100
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4 How is Overhead Allocated? Traditional method: Estimate MOH costs for the period Assign overhead based on a predetermined overhead allocation rate: POHR Estimated total manufacturing overhead cost for the coming period Estimated total units in the allocation base for the coming period POHR =
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5 The Allocation Base? Usually, direct labor hours or direct labor cost.
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6 Problem with Traditional Allocation Base Direct labor hours work well when overhead increases as direct labor hours increase. However, direct labor hours do not always work well: Increased automation causes overhead to increase while direct labor is decreasing. Not all overhead costs are related to direct labor hours.
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Problems with Traditional Method May not provide adequate information to managers to make good decisions Overhead costs have become more significant. Due to increased technology and automation, overhead costs make up a larger portion of the total costs of products. Direct labor costs or hours are no longer
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ACIS_2116_Chap8_Slides_no_blanks_Day_1 - Activity-Based...

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