ACCTG322 Lecture Notes - Lecture 4: Financial Statement, Expense, Activity-Based Costing
17 Apr 2015
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Objectives: what is activity-based costing (abc), when to implement abc system, designing an abc system, traditional product costing versus abc, limitations of abc system, modified form of abc costing (appendix 5b) Improved decisions: with respect to introduction, pricing and discontinuance of products; activity. Product margins computed using the traditional cost system: gather each product"s sales and direct cost data, compute the plant wide overhead rate, allocate manufacturing overhead to each product, compute the product margins. Designing an abc system: steps for implementing abc: 20: identify and define activities, activity cost pools and activity measures. 26: assign overhead costs to activity cost pools, calculate activity rates, assign overhead costs to cost objects using the activity rates and activity measures, prepare management reports. Gather each product"s sales and direct cost data. Incorporate the previously computed activity-based cost assignments pertaining to each product. Deduct each product"s direct and indirect costs from sales.
