FINC 577 Chapter 4 Notes Outline

30 chapter 4 14 four steps of activity based costing

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Unformatted text preview: our Steps of Activity-Based Costing ActivityIdentify Identify and classify the major activities and allocate manufacturing overhead costs to the appropriate cost pools. Identify the cost driver that has a strong correlation to the costs in the cost pool. p Compute the overhead rate for each pool. Assign overhead costs for each cost pool to products using the overhead rates. Chapter 4-15 Activity Cost Pools and Estimated Overhead Activity Cost Pools Setting up machines Machining Inspecting Total Chapter 4-16 Estimated Overhead $300,000 500,000 100,000 $900,000 Identify Cost Drivers Activity Cost Pools Setting up machines Machining Inspecting Expected Expected Use of Cost Drivers Cost Drivers Per Activity Number of setups 1,500 Machine hours 50,000 Number of Inspections 2,000 Chapter 4-17 Formula for Computing Activity-Based ActivityOverhead Rate Overhead Estimated Overhead Per Activity = Activity-Based Overhead Rate Expected Use of Cost Drivers Per Activity Activity Cost Pools Setting up machines Machining Inspecting Total Chapter 4-18 Estimated Overhead $300,000 500,000 100,000 $900,000 Expected Use of Cost Drivers Per Activity 1,500 setups 50,000 machine hrs. 2,000 inspections Activity-Based Act...
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