ACTG 2020 Chapter Notes - Chapter 7: Activity-Based Costing, Expense, Deutsche Luft Hansa
2 May 2017
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Management: costing method based on activities designed to give managers cost information, useful for strategic and other decisions affecting capacity + fixed costs, generally used as a supplement for internal use, not replacement of current cost method. Treatment of costs under the activity-based costing model. Non-manufacturing costs and activity-based costing: many costs excluded from product cost in traditional method counted in abc, can be parts of costs of producing, selling, distributing, and servicing products. I. e. commissions paid to salespeople, shipping costs, warranty repair costs easily traceable: products assigned all reasonably estimable overheads (non-manufacturing + manufacturing, determining entire cost of product, not just manufacturing. Idle capacity assigned to period costs, flow through income statement. Identify and define activities, activity cost pools, and activity measures. Assign overhead costs to cost objects using activity rates and activity measures. Step 2: assign overhead costs to activity cost pools: first-stage allocation process by which overhead costs are assigned to activity cost pools.
