Unformatted text preview: st objects and provides better measurement of the costs of overhead resources used by different cost objects. Three guidelines for refinement are 1. Classify as many o f the total costs as direct costs as is econo mically feasible. 2. Expand the number of indirect cost pools until each o f these pools is more ho mogenous. 3. Use the causeandeffect criterion, when possible, to ident ify the costallocat ion base for each indirectcost pool. 54 An activit ybased approach refines a costing system by focusing on individual act ivit ies as the fundamental cost objects. It uses the cost of these activit ies as the basis for assigning costs to other cost objects such as products or services. 55 Four levels o f a cost hierarchy are (i) Output unitlevel costs: costs of act ivit ies performed on each individual unit of a product or service. (ii) Batchlevel costs: costs of activit ies related to a group of units of products or services rather than to each individual unit of product or service....
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This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.
- Spring '10
- Cost Accounting