Chapter 6 Notes
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This 2 page Class Notes was uploaded by Caroline Fritze on Wednesday September 30, 2015. The Class Notes belongs to ACCT 202 at Clemson University taught by Kyle Anderson in Summer 2015. Since its upload, it has received 80 views. For similar materials see Managerial Accounting in Accounting at Clemson University.
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Killer notes! I'm stoked I can finally just pay attention in class!!!
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Date Created: 09/30/15
Chapter 6 ActivityBased Costing 09302015 Differs from traditional cost accounting because Nonmanufacturing and manufacturing costs can be assigned to products only on cause amp effect basis 0 Some manufacturing costs can be excluded from product costs 0 Many overhead cost pools are used 0 Products are assigned all of overhead costs manufacturing and nonmanufacturing Manufacturing overhead ex security guards wages plant controller s salary cost of supplies by the secretary Activity any even that causes the consumption of overhead resources 5 levels of activity in activity based costing Unitlevel activities performed each time a unit is produced Batchlevel activities performed each time a batch is handled or processed regardless of how many units in the batch Productlevel activities for speci c products usually occur regardless of how many batches are run or units are producedsold Customerlevel activities for speci c customers ex sales calls catalog mailings technical support Organizationsustaining activities occur regardless of customers products batches or units 0 Steps for Implementing ActivityBased Costing De ne activities activity cost pools and activity measures 0 Number and de nitions of activity cost pools and measures used vary Assign overhead costs to activity cost pools o Firststage allocation based on results from interviews with employees who have knowledge of the activities 0 Calculate activity rates Assign overhead costs to cost objects using the activity rates and activity measures 0 Secondstage allocation 0 Prepare management reports 0 Activitybased management focusing on activities to eliminate waste decrease processing time and reduce defects 0 While ABC gives us more accurate product costs than traditional it isn t used frequently for external reports 0 Ease of adjustment codes shows how easily a cost could change according to changes in activity 0 Green costs that adjust automatically without management action ex direct materials shipping costs 0 Yellow costs that could be adjusted but management action would be required ex direct labor indirect factory wages utilities office equipment depreciation selling expenses administrative wagessalaries Red costs that would be very difficult to change management action required ex factory equipment depreciation factory building lease administrative building lease
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