Unit 7 Flashcards
Uses of costing data
Setting Sales prices
Measuring gross margin
Valuing assets
Making optimal choices
Job Order Costing
calculating costs by specific product/service
used when a product/service is considered a job
ABC
Activity Based Costing - focused on overhead
apply overhead based on actual activities that create the overhead costs
When to use ABC?
When the production process for each different product/project/process uses infrastructure support in different ways
unit level activities
overhead activities that occur each time a unit is produced
batch level activities
overhead activities that occur a new production batch is started or ended, regardless of the size of the batch
product line activities
overhead activities associated with capability to produce different types of products, regardless of the number of batches
cost pool
total overhead cost generated by a specific overhead activity
cost driver
an activity that drives overhead cost
cost object
output of a business such as a product or service
activity rate
cost pool / number of cost driver events
process costing
costs are accumulated by a process and averaged over all products created in the process during a certain period
2 conditions for process costing to be appropriate
activities performed in process center are identical for all units
all units produced by a process are basically the same
