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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 machine hours and overhead
4-5 Why Do Companies Need a New Approach?
Tremendous change in manufacturing and
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
Complex manufacturing processes may require
multiple allocation bases; this approach is called
ActivityActivity-Based Costing (ABC).
4-6 ActivityActivity-Based Costing
Is another approach (other than traditional costing) to
allocate manufacturing overhead.
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
activities used. Chapter
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- Winter '14