Textbook Notes (363,381)
Canada (158,358)
Accounting (242)
ACCT 2230 (113)
Chapter 5

Chapter 5 Managerial Accounting Notes

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University of Guelph
ACCT 2230
Elliot Currie

Chapter 5 Managerial AccountingActivityBased Costing A tool to aid decisionmakingActivitybased costing ABC Costing A costing method based on activities that is designed to provide managers with cost information for strategicother decisions that potentially affect capacityfixed costs as well as variable costsUsually used as supplement to other accounting cost system this would just be for internal decision makingHow costs are treated under activitybased accounting ABC accounting is designed for use in internal decision makingNonManufacturing CostsActivity based costing In ABC costing products are assigned all of the overhead costsnonmanufacturingmanufacturing that they can reasonably be supposed to have caused we will be determining entire cost of product not just its manufacturing costManufacturing CostsActivity based costing In ABC costing a cost is assigned to a product only if there is a good reason to believe that the cost would be affected by decisions concerning the product Costs that are unaffected byproductrelated decisions are period costs in ABC costingCost Pools Allocation BasesActivity based costingActivity an event that causes the consumption of overhead resourcesActivity cost pool A bucket in which costs are accumulated that relate to a single activity measure in the activity based costing systemActivity measure An allocation base in an activity based costing system ideally a measure of the amount of activity that drives the costs in an activity cost pool cost driverTransaction Driver A simple count of the number of times an activity occursof bills sent out to a customerDuration Driver A measure of the amount of time requires to perform an activitytime sent preparing individual bill More accurate but more effort to prepareABC has 5 levels of activity1 Unit level activities performed each time a unit is produced Eg prov
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