COMM 305 Lecture Notes - Lecture 1: Deutsche Luft Hansa, New Approach
25 Jan 2015
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Document Summary
Recognize the difference between traditional costing and activity-based costing (abc) and understand the nature of abc. Identify the steps in the development of an activity-based costing system and compare unit. Traditional costing system allocates overhead using a single predetermined rate. costs. Understand the benefits and limitations of activity-based costing. Understand the value of using activity levels in activity-based costing. Job order costing: direct labour cost is assumed to be the relevant activity base. Process costing: machine hours is the relevant activity base. Direct labour was a major portion of total manufacturing costs. Wide acceptance of a high correlation between direct labour and overhead costs. Direct labour is the appropriate basis for assigning overhead costs when: Direct labour is a significant part of total product cost and a high correlation exists between direct labour and changes in. * decrease in amount of direct labour usage.
