BU247 Study Guide - Total Absorption Costing, Income Statement, Operating Leverage
Document Summary
Differences between abc and traditional product costs: tradtional costing allocates all manufacturing overhead to products. Abc costing directly traces shipping costs to products and includes non- manufacturing overhead costs caused by products in the activity cost pools that are assigned to products. Total vc is proportional to the activity level. Vc per unit is constant (ex. telephone cost/min) Fc per unit goes down as activity level goes up. Variable cost dollar amount varies in direct proportion to changes in the activity level. Fixed cost dollar amount remains constant as the activity level changes. Step-variable cost a resource that is obtainable in large chunks and whose costs increase/decrease only in response to fairly wide changes in activity. An example of step-variable costs is maintenance workers. Small changes in the level of production are not likely to have any effect on the number of maintenance workers employed.
