chapter%2070-1 - Chapter 7 Activity-Based Costing and...

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September 7, 2011 Accounting 2102 1 Chapter 7 Activity-Based Costing and Management
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What is Activity Based Costing What is Activity Based Costing (ABC)? (ABC)? overhead application system that exploits cause and effect relationships AND recognizes that overhead costs are generated on multiple levels: Unit Batch Product Facility (General Factory) September 7, 2011 Accounting 2102 2
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Other “facts” about ABC Other “facts” about ABC provides greater costing accuracy if a company offers multiple products that consume resources at different rates ABC can be used in other situations besides product costing chapters 5 and 6 used a Traditional Costing System based on a single, volume based cost driver ABC will often uncover that the high volume product has been overcosted September 7, 2011 Accounting 2102 3
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How does a company How does a company implement ABC? implement ABC? How does a company implement ABC? 1. identify key activities that generate overhead 1. identify the cost drivers of each activity 1. calculate company wide overhead rates 1. apply rates to cost objects September 7, 2011 Accounting 2102 4
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Before the Amplifier, Inc. Before the Amplifier’s operations have grown exponentially since we last
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chapter%2070-1 - Chapter 7 Activity-Based Costing and...

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