Ch. 4 outline

Ch. 4 outline - Ch. 4 Activity Based Costing Unit Level...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Unit Level Product Costing Predetermined overhead rate Calculated at beginning of year Budgeted annual overhead / Budgeted annual driver level Normal cost system Cost system that uses predetermined overhead rate Unit-level drivers – factors that measure the demands placed on unit-level activities by products Activities performed each time a unit is produced Units produced Direct labor hours Direct labor dollars Machine hours Direct machine dollars Increase as units produced increase Use of only unit-based drivers to assign overhead costs assumes that all overhead consumed by products is highly correlated with # of units produced Applied overhead – total overhead assigned to actual production Overhead rate x Actual driver usage Overhead Assignment: Plantwide Rates All budgeted overhead costs are assigned to a plantwide pool Next, a plantwide rate is computed using a single unit-level driver (usually direct labor hours) Overhead costs are assigned to products by multiplying the rate by actual total direct labor hours used by each product Calculation and Disposition of Overhead Variances Overhead variance – difference between actual overhead and applied overhead Underapplied – Actual overhead > applied Overapplied – Applied overhead > actual Corresponds to fixed cost Overhead variance is disposed in 2 ways: If immaterial: assigned to cost of goods sold If material: allocated among
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Ch. 4 outline - Ch. 4 Activity Based Costing Unit Level...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online