ACC 117 Lecture Notes - Lecture 11: Total Absorption Costing, Fixed Cost
24 Jul 2020
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Abc can also help identify the true cost of a firms suppliers. Cost of supplier is much more than the purchase price of components or materials acquired. Assigning costs to suppliers is similar to products and customers. Find repair and expediting rate by dividing the cost of each activity by the total failed units or late shipments. Multiply the rate by the # of infractions from each customer. Abm can be used for cost reduction. Focuses on cost reduction instead of cost assignment. All activities other than those that are absolutely essential to remain in business. The challenge of activity analysis is to find ways to produce the good without using any of these activities. Assume it takes 10000 hours to produce 20000 units of a product. Velocity = 20000/10000 = 2 units per hour. Cycle time = 10000/20000 = half hour per unit. Using absorption costing, calculate the per unit cost.
