RSM222H1 Lecture 5: Class 5

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Cost objects (e. g. products and customers ) -> activities. An activity is anything that causes the consumption of overhead resources. A(cid:272)ti(cid:448)ity (cid:272)ost pool is a (cid:862)(cid:272)ost (cid:271)u(cid:272)ket(cid:863) i(cid:374) (cid:449)hi(cid:272)h (cid:272)osts related to a parti(cid:272)ular a(cid:272)ti(cid:448)ity (cid:373)easure are accumulated. (similar to cost driver) Abc allocation procedures *direct material and direct labour are all allocated the same way: we look at all the costs and define a cost pool. We have two cost pools in this example (most companies use more than 5+ cost pools to capture more detail) Distinguish between unit-level, batch-level, product-level, organization-sustaining, and customer- Unit-based will i have to put certain components in a unit every time i have an activity. Have to insert a part into a unit each time. Batch-based have to set up the machine each time to make a batch of soda (set-up) Product-level does this activity have to be performed every time a company comes up with a new product (e. g.

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