ABC Day 2 Class Notes.docx - Activity-Base Costing Day 2...

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Activity-Base Costing: Day 2 Activity-Based Costing Foundation Activity-Based Costing (ABC) is a __two-stage_______ product costing method that assigns costs first to ___activities______ and then to ____products_____ based on the use of __the product’s use of activities________ . Thus, ABC assigns costs to ___activities______ in the __first stage_______ instead of _____departments_______ like department costing. ABC is easy as _123____ ! 1. Identify activities 2. Identify cost drivers 3. Compute the activity rate and assign cost A __cost hierarchy____________ classifies cost drivers into general levels of activity, volume, batch, product, and so on. Volume-related costs: costs incurred because of number of units being produced Batch-related costs: costs incurred with each batch or group of products produced Product-related costs: costs incurred related to only to a product that is not batch or unit related Facility-related costs: all other costs that do not fit in other levels Group Activity : Mitchell Corporation manufactures a variety of products in a single facility. Consultants hired by the

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