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Unformatted text preview: Activity-based costing is more accurate. It allocates the individual components of our overhead to our products based upon the product’s use of that overhead component. With the more accurate product costs, we should begin to concentrate our efforts upon reducing the costs of our more expensive overhead operations. As seen in the activity-based costing report, a large share of our total overhead is comprised of materials handling and production setup costs – costs which were not visible under the direct-labor approach. Reducing our materials handling and production setup costs should be a new priority. We recommend assessing the cost of using an activity-based system in our company. We will proceed with activity-based costing if we find the cost of the new system is less than the benefits of the more accurate information we will receive....
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This note was uploaded on 11/25/2010 for the course ACCT 33010 taught by Professor Staff during the Spring '08 term at Kent State.
- Spring '08
- Cost Accounting