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C213 chapt 10
Activity Based Costing (ABC)
| Question | Answer |
|---|---|
| activity based costs (ABC) | a method for more accurately assigning overhead costs to the products that create them |
| ABC step 1 | Identify overhead cost activities |
| ABC step 2 | Analyze individual overhead costs in terms of those cost activities |
| ABC step 3 | Identify measurable cost drivers |
| ABC step 4 | Assign overhead |
| ABC step 5 | Use the ABC data to make decisions |
| Traditional product costing systems (e.g. job order costing and process costing) usually assume that | Products consume overhead costs |
| The allocation of which of the following can cause the greatest errors when computing product costs | manufacturing overhead |
| The four general categories of ABC activities are | •Unit•Batch•Product line•Facility support |
| unit level activities | those overhead activities that are performed each time a unit is produced |
| types of unit level activities | •Machine maintenance •Machine depreciation •Electricity and other energy costs |
| overhead activities that are performed each time a new production batch is started or ended | batch level activities |
| •Inspections •Machine setups •Movement of and accounting for materials | types of batch level activities |
| overhead activities that are associated with the capability to produce different types of products | product level activities |
| •Engineering product design •Storage in special warehouses •Managing by a special supervisor of all activities associated with a particular product line •Ordering, purchasing, and receiving materials unique to a particular product line | types of product line activities |
| overhead activities that must be in place before any of the other production activities can take place | facility support activities |
| •Property taxes •Factory insurance •Security •Landscaping •General accounting •General factory administration | types of facility support activities |
| each of the overhead cost activity columns | cost pool |
| Tracing overhead costs to activities involves dividing overhead costs | into cost pools |
| used to track how costs of activities are related to specific cost objects such as products or divisions | cost drivers |
Created by:
nashanta
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