{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ACCT 204 Chapter 7 print

ACCT 204 Chapter 7 print - 13-1 Activity Based Costing ACCT...

Info icon This preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
13-1 Activity Based Costing ACCT 204 Chapter 7
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
13-2 Three Basic Cost Systems Three costing systems o __ Job order __ o __ Process __ o __ Activity-based __ In each of these systems DM and DL cost are traced to products in essentially the same manner, though the record keeping differs The big accounting difference is the treatment of overhead
Image of page 2
13-3 Accounting for Overhead Job-order and __process__ systems o Use a single plant-wide rate , traditionally based on DL hours or dollars …… or o Use a separate rate for each department , usually based on DL, DM, or machine hours Activity-based costing o Develop a separate rate for each activity that causes cost to be incurred. Activities should NOT be equated to departments o In real companies, there will be a lot more rates than in a process costing system o ABC concept can also be used to allocate cost other
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
13-4 Activity Based Costing ABC is designed to provide managers with cost information for strategic and other __ decisions __ that potentially affect capacity, and therefore, affect “fixed” as well as variable costs. Each ABC cost pool has its own unique measure of activity.
Image of page 4
13-5 Characteristics of Activity-Based Costing Systems Most relevant in companies that make many different products Key element is the use of __ many __ overhead application rates ABC gives more accurate measure of cost of each product Because pricing decisions are often made on the basis of “full” cost, ABC results in better pricing decisions
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
13-6 Characteristics of Activity-Based Costing Systems Obvious disadvantage of ABC -- lots of record keeping Computerized accounting systems made ABC possible Activities are classified as: o Unit-level o __ Batch __ -level o Product level o ___ Customer ___ level
Image of page 6
13-7 Mechanics of ABC Identify significant activities that cause costs to be incurred Determine the total cost expected to be generated by each activity Identify the best __ cost __ __ driver __ for each activity Compute the OH rate for each activity Allocate the cost of each activity center to various products (job) based on the rate Total the OH charged to each product from each activity Divide the total OH for each product by the units expected to be produced to determine the OH cost per unit for that product
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
13-8 Three Differences with ABC [1] Nonmanufacturing as well as manufacturing costs may be assigned to products, but only on a cause-and-effect basis. ABC systems can assign sales commissions, shipping costs, and warranty repair costs to specific products.
Image of page 8
13-9 Three Differences with ABC [2] Some manufacturing costs may be excluded from product costs. o ABC only assigns a cost to a product if decisions concerning that product will cause changes in the cost.
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern