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Unformatted text preview: Activity based costing (ABC), which is based on the concept of assigning overhead costs based on activities That drives overhead costs rather than the volume or number of units produced, provides more accurate Costing in these situations. Activities are procedures or processes that cause work to be accomplished. Activities consume resources and overhead costs are assigned to products produced based on consumption of Activities. Designing an ABC System Two steps are needed: Activities are identified and overhead costs are traced to each activity Activity (cost) drivers are determined for each activity and overhead costs are assigned to products based On consumption of activities. OR Identify and define activities and activity pools Trace or assign overhead costs to activities Compute activity(pool) rates Assign overhead costs to cost objects (e.g. products, customers.)...
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This document was uploaded on 03/28/2012.
- Spring '09
- Managerial Accounting