Unformatted text preview: (iii)Productsustaining costs or servicesustaining costs: costs of activit ies undertaken to support individual products or services regardless of the number of unit s or batches in which the units are produced. (iv) Facilit ysustaining costs: costs of act ivit ies that cannot be traced to individua l products or services but support the organizat ion as a who le. 56 It is important to classify costs into a cost hierarchy because costs in different cost pools relate to different costallocat ion bases and not all costallocat ion bases are unitlevel. For example, an allo cation base like setup hours is a batchlevel allocat ion base, and design hours is a productsustaining base, both insensit ive to the number o f unit s in a batch or the number o f units o f product produced. If costs were not classified into a cost hierarchy, the alternat ive would be to consider all costs as unitlevel costs, leading to misallocat ion of those costs that are not unitlevel costs. 51 57 An ABC approach focuses on activit ies as the fundamental cost objects. The costs of...
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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