COMMERCE 2AB3 Lecture Notes - Lecture 5: Activity-Based Costing, Peanut Butter, Indirect Costs
7 Mar 2017
School
Department
Course
Professor
Document Summary
The traditional costing systems were developed in the early 1900s. In those days most manufacturing companies were labor intensive, the product variety was small, and the overhead costs were generally very low compared to today. In the late 1970s and particularly 1980s, foh have increased significantly and most companies started to produce more varieties of their products to satisfy different needs for different customers. In addition, non-manufacturing indirect costs such marketing expenses became very important and significant to achieve customer satisfaction and to enhance profitability of the different products. Major problems with traditional costing systems (tcs: tcs considers only indirect manufacturing costs as product cost. Non-manufacturing costs such as selling and administrative costs are not assigned to products or services. However, many of these non-manufacturing costs are significant part of the costs of the products and can be identified with certain products.
