RSM322H1 Lecture Notes - Lecture 1: Financial Statement, Finished Good, Activity-Based Costing
Document Summary
Situations where this type of method is appropriate. Analysis of processing a joint product past the split off point. Optimizing production where there is a constrained resource. Can be used for any type of business segment ( product, geographical location, customer, etc) Costs direct to segment ( both fixed and variable) are those that will disappear when segment disappears and are included in the segment margin. All other costs are common costs which should not be allocated. Activity based costing ( abc) to any segment. This type of analysis cannot be used for external ( gaap) reporting. Focuses on fixed costs and attempts to discover the underlying cost drivers which are usually not volume ( unit ) related. Allocates costs previously treated as fixed more accurately to cost objects. Is expensive but can be used effectively where the fixed costs are high, from various sources and the users of the fixed resources are diverse.
