cost_acct_exam_2-cheat_sheet

cost_acct_exam_2-cheat_sheet - CHAPTER 5 ABCs 7 Steps Step...

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CHAPTER 5 ABC’s 7 Steps Step 1: chosen cost objects . Step 2: direct costs of the products. Step 3: Select the activities and cost-allocation bases to use Step 4: the indirect costs . Step 5: Compute rate per unit of each base Step 6: Compute indirect costs allocated to the products. Step 7: Compute the total costs of the products by adding all direct and indirect costs assigned to the products. COST HIERARCHIES- Output unit-level costs are the costs of activities performed on each individual unit of a product or service.Ex: machine depreciation Batch-level costs are the costs of activities related to a group of units of products or services rather than the individual unit. Ex. Set-up costs Product-sustaining costs (service-sustaining costs) are the costs of activities undertaken to support individual products or services regardless of the number of units or batches produced. Ex: Design costs, advertising of product Facility-sustaining costs are the costs of activities that cannot be traced to individual products or services but support the organization as a whole. Ex: general administration, rent, and building security .These costs usually lack a cause-and-effect relationship between the cost and the allocation base. *Production-cost cross-subsidization results from: assigning broadly averaged costs across multiple products without recognizing amounts of resources used. *in refining a cost system---the criterion of cause and effect is used to relate indirect costs to a factor that systematically links to a cost object. * Peanut-butter costing---uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way. *the statements is more representative of ABC in comparison to a department costing---the use of activities having a cause-effect relationship.
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This note was uploaded on 05/04/2011 for the course ACCY 121 taught by Professor Fagan,k during the Spring '08 term at CSU Sacramento.

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cost_acct_exam_2-cheat_sheet - CHAPTER 5 ABCs 7 Steps Step...

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