Chapter 7 Flashcards
Activity Based Costing
Assigns both types of costs to products, most but not all manufacturing costs and non manufacturing costs
Transaction Cost Driver
Simple count of number of times activity occurs
Duration Cost driver
This is costly and measures the amount of time needed for activities
5 levels of activity
- Product Level
- OS activity
- Customer Level
- Batch Level
- Unit Level
Product Level
Relates to specific products and must be carried out regardless of how many batches are run or units of products are produced
OS Activity
For every product,
Customer Level
Made for the customer specifically
Batch Level
Manufacturing or non manufacturing - anything clerical
Unit Level
One thing to one unit
Characteristics of successful ABC
Strong top management
Cross Functional Involvement
Rewards
Bench marking
Used to compare results with similar organizations
Difference between ABC costing and traditional
Non manufacturing and manufacturing costs may be assigned to products
Some manufacturing costs are excluded from product costs
Numerous overhead costs pools are used
Providing power to run processing equipment
Unit-level activities
Placing purchase orders
Batch level
Setting up equipment
Batch level
Arranging for shipments to customers
Batch level
Designing a product
Product level
Advertising a product
Product level
Various individuals manage parts in inventory
Product level
What are budgets used for
Planning and controlling
What is the principal purpose of the cash budget
To anticipate financial needs
What is budget depreciation apart of
For sure manufacturing over head and budgeted income statement
What is depreciation for sure not apart of
Cash budget
What are the two costs not apart of ABC product costing
Idle time
Organization sustaining
