WK3 DQ1.docx - Activity based costing(ABC assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of

WK3 DQ1.docx - Activity based costing(ABC assigns...

This preview shows page 1 - 2 out of 4 pages.

Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours [ CITATION Ave1 \l 1033 ] . Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities. Use activity-based costing in an organization is described by the following example: Imagine you are the chief financial officer of Five Star Bank. You are interested in implementing an activity-based costing system to evaluate the cost of different loan products, such as auto loans and home equity loans, offered by the bank. Let’s look at how these steps might work when evaluating the cost of bank loans. Step 1. Identify costly activities. Processing loans includes activities such as meeting with customers, reviewing customer applications, and running credit reports. Step 2. Assign overhead costs to the activities identified in step 1.
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 4 pages?

  • Spring '18
  • professor newerze
  • Personal Finance, Cost driver, overhead costs

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors