MGT223H5 Lecture Notes - Activity-Based Costing, Expense
Document Summary
Three roommates hare a place, they share costs for internet, cable, groceries and rent. So readjust how much they pay to amount used. Designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore affect fixed as well as variable costs. Abc uses more cost pools: traditional cost systems usually rely on volume measures such as dl (hrs or machines hrs) to allocate all overhead costs to products. This results in applying all overhead costs including unused, or idle capacity costs to products. How costs are treated under activity- based costing: batch level activity: by increasing the quantity in a batch wont change the batch activity level. It will only increase when you make another batch: customer-level activity: only increases with customers. If cx increase, will need to print more catalogues, make more customer feedback calls etc: organization-sustaining activity, product-level activity, unit-level activity.
