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Unformatted text preview: 1 Ch8 ABC Managerial Accounting ADM2341 1 Ch 8 ABC Costing UNIT COSTS are needed for: • inventory valuation • the income statement • bidding on contracts • make or buy • special orders Sometimes accuracy is critical, then ABC Ch8 ABC Managerial Accounting ADM2341 2 TRADITIONAL COSTING: STEPS Problem: If the consumption of resources by the product is not well related to levels of production, then distorted costs result Products or services One driver Cost assignment One pool Plantwide pool Examples? Ch8 ABC Managerial Accounting ADM2341 3 ACTIVITY BASED COSTING: STEPS Cost objects Then allocate to products or other cost effects based on demand for the activity Cost drivers Identify cost objects of the activity Multiple pools Identify cost pools 2 Ch8 ABC Managerial Accounting ADM2341 4 Pens Example Production : Blue pens 1,000,000 Green pens 10,000 Overhead for setups $200,000 Batches (one setup per batch): 5,000 blue pens per batch 2,000 green pens per batch Overhead costs per pen? Overhead costs per pen?...
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- Winter '07
- Cost Accounting, Managerial Accounting ADM2341, ABC Managerial Accounting