Unformatted text preview: Definitions
Activity: Any event, action, transaction, or work
sequence that causes a cost to be incurred in
producing a product or providing a service.
Activity Cost Pool: The overhead cost attributed
to a distinct type of activity.
Setting up machines.
Cost Drivers: Any factors or activities that have
with the resources consumed.
4-8 ActivityActivity-Based Costing
ABC allocates overhead costs in two stages:
Stage 1: Overhead costs are allocated to
activity cost pools.
Stage 2: The overhead costs allocated to the
cost pools are assigned to products
using cost drivers.
The more complex a product’s manufacturing
operation, the more activities and cost drivers
likely to be present.
4-9 OVERHEAD COSTS Chapter
Overhead Costs Chapter
4-11 ActivityActivity-Based Costing
ABC does not replace an existing job
order/process cost system.
ABC does segregate o...
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