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ACIS 2116 Chapter 6 Part 1 with Blanks

ACIS 2116 Chapter 6 Part 1 with Blanks - Activity-Based...

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1 Activity-Based Costing ACIS 2116 Chapter Six – Part 1
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2 How is Overhead Allocated? Traditional method: Estimate ____ costs for the period Assign overhead based on a predetermined overhead allocation rate: _____ Estimated total manufacturing overhead cost for the coming period Estimated total units in the allocation base for the coming period POHR =
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3 The Allocation Base? Usually, _____ labor hours or ______ labor cost.
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4 Problem with Traditional Allocation Base Direct labor hours work well when overhead _______ as direct labor hours increase. However, direct labor hours do not always work well: Increased automation causes overhead to increase while direct labor is __________. Not all overhead costs are related to direct labor hours.
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5 Problems with Traditional Method May not provide adequate information to managers to make good decisions Overhead costs have become more __________. Due to increased technology and automation, overhead costs make up a larger portion of the total costs of _______. Direct labor costs or hours are no longer an adequate allocation base.
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6 ABC Costing Provides managers with better information for making _________. Used in addition to a traditional costing system.
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