AFM481 Chapter Notes - Chapter 14: Variable Cost, Marginal Cost, Fixed Cost
11 Jul 2020
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Full product costing: requires the recovery of all costs generated by all business functions in the value chain. Four possible purposes: provide information for economic decisions, costs in all functions should be included, costs from more than one function are often excluded, motivate managers and employees. Justify either costs or reimbursement internally or externally: stated in contracts, measure aspe/ifrs-compliant income and assets for reports to external parties. Criteria to guide cost-allocation decisions: cause and effect. Identify variables that cause the resources to be consumed: most credible to operating personnel, primary criterion used in activity-based costing applications, benefits received. Deciding between single- and dual-rate cost methods: core-divisions: produce each product, operating decision, production division, adds value to output for which the customer will pay, operating department: directly adds value to a product or service. Support department: provides the services that assist other internal departments in the company: two questions when allocating costs of a support department.
