BUS 254 Chapter Notes - Chapter 5: Cost Driver, Deutsche Luft Hansa, B Unit

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Arsineh Garabedian

Document Summary

The business environment has changed as a result of ever-increasing international competition, technological innovation, and advances in computerized systems. The system generally group moh into one cost pool and apply overhead to products based on dl, with labor being a measure of volume. May function in a satisfactory manner for inventory valuation. The moh applied does not bear a close enough relationship to the resources required to build different products or perform different services. With increasing factory computerization and automation (and the reduction of hands-on labor), the correlation between moh and dl is weak. Many organizations are changing to abc, which improves product costing and decision making, and involves two stages: stage one, the overhead costs of an organization"s significant activities are first isolated into activity cost pools. Involves identifying a cost driver for each pool, that assigning. Cost drivers: the degree of correlation between activity consumption an driver consumption of has a significant impact on the accuracy of abc.