Management and Organizational Studies 3370A/B Lecture Notes - Lecture 7: Activity-Based Costing, Expense, Total Absorption Costing

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Laura Timusk

Document Summary

Activity based costing (abc) - designed to provide managers with cost information for strategic and other de(cid:272)isio(cid:374)s that pote(cid:374)tiall(cid:455) affe(cid:272)t (cid:272)apa(cid:272)it(cid:455), a(cid:374)d therefore, affe(cid:272)t (cid:862)fi(cid:454)ed(cid:863) as well as variable costs. Differs from traditional costing in four ways: some non-manufacturing costs are including in product costing, abc does not assign all manufacturing costs to products, abc uses more cost pools. Each pool has own unique measure of activity. Traditional cost systems usually rely on volume measures such as dl hours and/or machine hours to allocate all oh to products: abc bases level of activity on capacity. Products charged for costs of capacity they use not for additional unused capacity (treated as period expenses) Traditional pohr based on budgeted activity applies all oh costs. Activity an event that causes the consumption of oh resources. Activity cost pool 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)it(cid:455) (cid:373)easure are accumulated.