FINC 577 Chapter 4 Notes Outline

Assumption was satisfactory when machine hours were a

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Unformatted text preview: n was satisfactory when machine hours were a major portion of total manufacturing costs. There should be of a high correlation between between machine hours and overhead costs. Chapter 4-5 Why Do Companies Need a New Approach? Tremendous change in manufacturing and service industries. Decrease in amount of direct labor usage. Significant increase in total overhead costs. May be inappropriate to use plant-wide plantpredetermined overhead rates based on direct labor or machine hours when a lack of correlation correlation exists. Complex manufacturing processes may require multiple allocation bases; this approach is called ActivityActivity-Based Costing (ABC). Chapter 4-6 ActivityActivity-Based Costing Is Is another approach (other than traditional costing) to allocate manufacturing overhead. An An overhead cost allocation system that allocates overhead to _______________________________, and Assigns Assigns the activity cost pools to products or services by means of _______________that represent the _______________that activities used. Chapter 4-7 ABC...
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