ACC 406 Chapter Notes - Chapter 7: Activity-Based Costing, Volvo S80, Cost Driver

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25 Jul 2016
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Chapter 7: Activity Based Costing
Limitations of Volume Based Accounting System
Unit Level Activities: Activities that are performed each time a unit is produced
Non Unit Level Activities: Activities that are not performed each time a unit is
produced
Non Unit Level Activity Drivers: Factors that measure the consumption of non unit
level activities by products and other cost objects (ex. batch, product sustaining, and
facility-sustaining)
Unit Level Activity Drivers: Measure the consumption of unit level activities
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Product Diversity: The products consumer overhead activities in consistently different
proportions
Products may consume overhead at different rates because of differences in:
-Product size
-Product complexity
-setup time
-batch size
Consumption Ratio: The proportion of each activity consumed by a product
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