BUS 254 Chapter Notes - Chapter 5: Cost Driver, Childrens Hospital
13 May 2016
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BUS 254 Full Course Notes
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Chapter 5 readings: traditional volume-based product-costing system (page 151) Labour hours are related closely to the volume of activity in the factory, which sometimes is referred to as throughput. Consequently these traditional product costing systems are often said to be volume based. Trouble in mississauga (page 152: activity-based costing (abc) system (page 153) First stage: identifies significant activities in the production of the products and assigns overhead costs to each activity in accordance with the cost of the organization"s resources used by the activity. The overhead costs assigned to each activity make up the activity cost pools. Second stage: cost drivers appropriate for each cost pool are identified. Using pool rates, the overhead costs are allocated from each activity cost pool to each product line in proportion to the amount of the cost driver consumed by the product line. The abc project team identifies 8 activity cost pools, which fall into 4 broad categories:
