New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Chapter 7 Notes : Activity-Based Costing

by: Dalia Szkolnik

Chapter 7 Notes : Activity-Based Costing ACC 212

Marketplace > University of Miami > ACC 212 > Chapter 7 Notes Activity Based Costing
Dalia Szkolnik
GPA 3.8

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These notes cover activity-based costing. They are a bit short because she is not focusing on this chapter too much and said just a few things would be on the exam.
Managerial Accounting 212
Class Notes
25 ?




Popular in Managerial Accounting 212

Popular in Department

This 2 page Class Notes was uploaded by Dalia Szkolnik on Tuesday March 8, 2016. The Class Notes belongs to ACC 212 at University of Miami taught by Quintana in Spring 2016. Since its upload, it has received 10 views.

Similar to ACC 212 at UM


Reviews for Chapter 7 Notes : Activity-Based Costing


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 03/08/16
Chapter 7 Notes Activity-Based Costing Traditional absorption costing  provide data for external financial reports Activity-based costing (ABC) provide information to internal decision making Three ways it differs from traditional absorption costing: 1) Nonmanufacturing costs • Many nonmanufacturing costs relate to selling, distributing, and servicing • ABC includes nonmanufacturing and manufacturing costs when calculating the entire cost of a product i. Traces all direct nonmanufacturing costs to products 1. Commissions to salespersons, shipping costs, warranty repair costs ii. Allocates indirect nonmanufacturing costs to products whenever the product have caused the costs to be incurred 2) Manufacturing costs • ABC doesn’t assign two types of manufacturing overhead costs to products i. Organization-sustaining costs 1. They are treated as period expenses rather than product costs a. Factory security guard’s wages, cost of supplies used by plant manager’s secretary ii. Products are only charged for the costs of the capacity they use 3) Cost pools and Allocation Bases • Activity: event that causes consumption of overhead resources • Activity cost pool: “bucket” in which costs are accumulated that relate to a single activity measure in the ABC system • Activity measure: allocation based (cost driver) i. Transaction drivers: number of ties an activity occurs (example: number of bill sent out to customers) ii. Duration drivers: amount of time required to perform an activity (example: time spend preparing individual bills for customers) • Levels of activity i. Unit-level activities: each time a unit is produced (example: providing power to run processing equipment) ii. Batch-level activities: each time a batch is handled or processed; it doesn’t matter how many units are in the batch (example: placing purchase orders, setting up equipment) 1. Depend on the number of batches processed not in the number of units produced or sold iii. Product-level activities: specific products and are carried regardless of how many batchers or units of product are produced/sold (example: designing a product, advertising a product) iv. Customer-level activities: activities not tied to any specific product but to the customers (example: sale calls, catalog mailings and technical support) v. Organization-sustaining activities: activities such as heating the factory, cleaning offices, preparing annual reports Activity-Based Costing (ABC) System • Strong top management support + cross-functional involvement + link to evaluation and rewards = successful ABC implementations Cost objects (products and customers) Activities Consumption of Resources Cost Steps: • Defining activities, activity cost pools, activity measures Activity Cost Pools Activity cost pool Activity measure Customer orders Number of customer orders Product design Number of product designs Order size Machine-hours Customer relations Number of active customers Other Not applicable • Assign overhead costs to activity cost pools o First-stage allocation: process of assigning functionally organized overhead costs derived from a company’s general ledger to activity cost pools • Calculate activity rates o Determine total activity for each pool hat would be required to product the company’s present product mix and serve its present customers o Activity rates = total cost for each activity / total activity • Assign overhead costs to cost objects using activity rates and activity measures o Second-stage allocation: activity rates are used to apply overhead costs to products and customers • Prepare management reports o Product and customer profitability reports o Help companies channel their resources to grow opportunities and highlight products/customers that drain profits


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.