AC 212 Lecture Notes - Lecture 2: Contribution Margin, Fixed Cost, Variable Cost

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Review for test # 2 chapters 4, 6-7. Separate manufacturing overhead rates for each department: indirect products costs, allocated, assigning, or charging. Over-costing for some products and under-costing for other products. Total estimated departmental overhead cost pool / total estimated amount of the departmental allocation base. Calculating the total amount of manufacturing overhead to allocate to a particular job with departmental overhead rates: Multiply each departmental overhead rate (see above) by the actual amount of the departmental allocation based used by the job; and then add together the allocated amounts from each department. Activity costing focuses on activities rather than departments, is the fundamental cost of objects: compute the activity allocation rate. Total estimated activity allocation: compute the allocated overhead. Allocated overhead= activity cost allocation rate * actual amount of activity allocation base used by the job: best cost drivers, pricing and product mix decisions, cutting costs, routine planning and control decisions.

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