ch04 - 4-1 Activity-Based Activity-Based...

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Unformatted text preview: 4-1 Activity-Based Activity-Based CostingCostingCHAPTERCHAPTER4-2 1.Discuss the importance of unit costs.2.Describe functional-based costing approaches.3.Explain why functional-based costing approaches may produce distorted costs.4.Explain how an activity-based costing system works for product costing.ObjectivesObjectivesObjectivesObjectivesAfter studying this After studying this chapter, you should chapter, you should be able to:be able to:After studying this After studying this chapter, you should chapter, you should be able to:be able to:continuedcontinuedcontinuedcontinued4-3 5.Provide a detailed description of how activities can be grouped into homogeneous sets to reduce the number of activity rates.6.Describe activity-based customer and supplier costing.ObjectivesObjectivesObjectivesObjectives4-4 Unit costis the total cost associated with the units produced divided by the number of units produced.Unit costis the total cost associated with the units produced divided by the number of units produced.Inventory valuationIncome determinationProviding input to a variety of decisions such as pricing, make or buy, and accept or reject special ordersUnit cost is used for--4-5 Product costis often defined as the sum of direct materials, direct labor, and manufacturing overhead. This definition is required for external financial reporting.Product costis often defined as the sum of direct materials, direct labor, and manufacturing overhead. This definition is required for external financial reporting.4-6 Cost measurementconsists of determining the dollar amounts of direct materials, direct labor, and overhead used in production.Cost measurementconsists of determining the dollar amounts of direct materials, direct labor, and overhead used in production.4-7 The process of associating the costs, once measured, with the units produced is called cost assignment.The process of associating the costs, once measured, with the units produced is called cost assignment.4-8 Two possible measurement systems are actual costing andnormal costing.Measurement SystemsMeasurement SystemsMeasurement SystemsMeasurement SystemsActual costingassigns the actual costs of direct materials, direct labor, and overhead to products.Normal costingassigns the actual costs of direct materials and direct labor to products; however, overhead cots are assigned to products using predetermined rates.4-9 Measurement SystemsMeasurement SystemsMeasurement SystemsMeasurement SystemsA predetermined overhead rate is a rate based on estimated data.A predetermined overhead rate is a rate based on estimated data.Budgeted (estimated) costEstimated activity usage4-10 Examples of Unit-Level DriversExamples of Unit-Level DriversExamples of Unit-Level DriversExamples of Unit-Level DriversUnits producedDirect labor hoursDirect labor dollarsMachine-hoursDirect material dollars4-11 Units (of driver)TimeTheoreticalPracticalNormalExpected actual4-12 Functional-Based Costing: Plantwide RateFunctional-Based Costing:...
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ch04 - 4-1 Activity-Based Activity-Based...

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