ACC 406 Chapter Notes - Chapter 7: Resource Consumption
Document Summary
Limitations of functional-based cost accounting systems: plantwide and departmental rates based on direct labor hours, machine hours, or other volume-based measures. 1) proportion of nonunit-related overhead costs to total overhead costs is large. All other costs (e. g. , ones that aren"t unit-level) are considered: costs associated with nonunit-level activities are unlikely to vary with, proponents of abc refer to the abc cost hierarchy that categorizes units produced costs as: Batch-level (vary with the number of groups or batches that run) Setting up the equipment for each batch. Plantwide rate = total overhead costs / total direct labor. Hours: activity-based product costing: detailed description, functional-based overhead costing involves 2 major stages. 1) overhead costs are assigned to an organizational unit (plant or departmental) 2) overhead costs are then assigned to cost objects: abc system first traces costs to activities and then to cost objects. Activities consume resources, and cost objects, in turn, consume activities.
