MGAB03H3 Lecture Notes - Lecture 5: Liability Insurance, Cost Driver, Cost Accounting

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Document Summary

Abc system assigns activities performed in manufacturing/service delivery process. It trace costs more accurately to products/other cost objects than done by traditional methods. Used with activity-based management to improve operations/minimize activities that don"t add value. Activity is a type of task/function performed in an organization. Abc cost hierarchy: general categories for the cost hierarchy based on different levels of operation. Organization-sustaining activities are related to overall organization & are unaffected by number/types of facilities/customers or by volumes of products, batches, units. Facility-sustaining activities are related to overall operations of facility and unaffected by # customers served, quantity of products, batches, or units. Customer-sustaining activities related to individual/groups of past/current/future customers & aren"t driven by total sales volumes/mix. These costs are typically not allocated because they don"t vary with activity volumes. Costs typically not allocated except when organization needs to allocate all product costs for purpose. Batch-level activities performed for each batch of product & not related to.

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