MGM222H5 Chapter Notes - Chapter 5: Activity-Based Costing, Cost Driver, Cost Accounting
Document Summary
In traditional cost accounting: only manufacturing costs are assigned to products. Use term overhead to refer to non manufacturing costs as well as indirect manufacturing costs. In abc: products are assigned all of overhead costs non and manufacturing- that can be reasonably estimated: some manufacturing costs may be excluded from product costs. Traditional cost accounting: all manufacturing costs assigned to products. Even the ones not caused by products. In abc: cost assigned only if there"s good reason to believe cost would be affected by decisions concerning the product, whereas everything else is expensed. Results in better info for decision making purposes: numerous overhead cost pools used, each allocated to products and other cost objects using own unique measures of activity. Overhead cost pool: group of overhead cost elements. Activity: event that causes the consumption of overhead resources. Activity cost pool: bucket in which costs are accumulated that relate to a single activity measure in the abc system.
