RSM222H1 Chapter Notes - Chapter 7: Cost Driver, Cost Accounting, Computer Network
Document Summary
Week 5: activity-based costing: activity-based costing: costing method based on activities designed to provide managers with cost information for strategic and other decisions that potentially affect capacity (and therefore fixed costs) Calculate unit product costs for managing overhead. Abc versus traditional cost accounting: non-manufacturing and manufacturing costs assigned on cause-and effect- basis, some manufacturing costs excluded from product costs, use numerous overhead cost pools (groups of overhead cost elements) Allocate to products and cost objects using own unique measures of activity: overhead rates may be based on level of activity at capacity rather than budgeted level. Costs to include/exclude: include non-manufacturing costs if cost reasonably caused by product, assign indirect manufacturing costs only if reasonably caused by product. Shipping, receiving, warranty on that particular product. Only if cost would be affected by decisions concerning product: ignore costs of security guard, plant controller"s salary, charge only costs of capacity used. Traditional costing also includes cost of idle capacity in overhead rate.
