Chapter 7: Activity-Based Costing: A Tool to Aid Decision Making Flashcards
ABC Costing Method-
Provides managers with cost information strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs.
ABC excludes __ __ costs and idele capacity costs from product costs
organization sustaining
ABC assigns both __ and __ costs to products on a cause and effect basis
manufacturing and nonmanufacturing
ABC uses __ cost pools. ETC-
multiple; plantwide overhead rate, departmental overhead rate, activity-based costing
Activity-
an event that causes the consumption of overhead resources.
Activity Cost pool-
a “cost bucket” in which costs related to a single activity measure are accumulated
Activity measure-
an allocation base in an activity-based costing system, a term cost driver is also used to refer to this.
Transaction driver-
a simple count of the number of times an activity occurs
Duration driver-
a measure of the amount of time needed for an activity
Manufacturing companies 5 basic activity classifications:
- unit level
- product level
- batch level
- organization-sustaining
- customer-level
Types of cost pools:
- Customer order
- Design order
- Order size
- Customer relations
Customer orders-
assigned all costs of resources that are consumed by taking and processing customer orders
Design orders-
assigned all costs of resources consumed by customers requested design changes
Order size-
assigned all costs of resources consumed as a consequence of the number of units produced
Customer relations
assigned all costs associated w/ maintaining relations with customers.
