activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH)‚ material handling (MH)‚ and number of shipments (NS) as cost drivers. Data on the cost pools and respective driver volumes follow. Product Alpha Gamma Pool Cost Pool No. 1 (Driver: DLH) 200 1800 $420‚000 Pool No. 2 (Driver: MH) 15 10 $375‚000 Pool No. 3 (Driver: NS) 2‚000 18‚000 $20‚000 1. The overhead cost allocated to Alpha by using traditional costing procedures
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CHAPTER 2: RELEVANT REVENUES AND COSTS The primary goal of a firm is to maximize profits. This implies‚ of course‚ that each decision a manager makes is consistent with that goal. Although managers are expected to rely on internally-produced reports‚ such as balance sheets and income statements‚ to help them make decisions‚ most of the information that appears on these statements is period-based rather than decision-based. A balance sheet shows the sum total of a firm’s assets and liabilities
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Q1: explicit costs and implicit costs concepts Explicit Cost Explicit cost is defined as the direct payment which is supposed to be made to others while running business. This includes the wages‚ rents or materials which are due in the contract. The explicit cost is the expense done in business which can easily be identified and accounted for in the business at any stage. The explicit cost represents the out flows of cash in clear and obvious terms. When any out flow of credit occurs in a business
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product costs are the direct materials‚ and manufacturing overhead that are involved in acquiring or making products. Products costs are assigned to an inventory account on the balance sheet and considered to be assets. When the goods are sold‚ the costs are released from inventory and are recognized as expenses in the income statement. Period costs are all the costs that are not included in product cost‚ such as advertising‚ executive salaries‚ and other nonmanufacturing costs. These costs are expenses
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Cost Classifications for Decision-Making. Every decision involves choosing from among at least two alternatives. Only those costs and benefits that differ between alternatives are relevant in making the selection. This concept is explored in greater detail in the chapter on relevant costs. However‚ decision-making contexts crop up from time to time in the text before that chapter‚ so it is a good idea to familiarize students with relevant cost concepts. 1. Differential Costs. A differential cost
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Cost allocation for indirect costs Cost Pool – Set of costs that are added together before being allocated to cost objects on some common basis Cost Driver/ Allocation base Cost Object Cost Driver Rate = Total Costs in Pool/ Total Quantity of Driver Where total quantity of driver = practical capacity of driver Cost of excess capacity = Cost Driver Rate * Excess capacity Predetermined overhead rate - cost per unit of the allocation base used to charge overhead to products. Predetermined
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Cost of Quality (COQ) "The cost of quality." It’s a term that’s widely used – and widely misunderstood. The "cost of quality" isn’t the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service. Every time work is redone‚ the cost of quality increases. Obvious examples include: The reworking of a manufactured item. The retesting of an assembly. The rebuilding of a tool. The correction of a bank statement. The reworking of a service‚ such as
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Cost Classification Introduction: In this assignment I will be discussing how costs incurred in any organization may be classified in a number of different ways for a number of different purposes. I will also be looking to find companies that use a variety of different costing techniques and methods. I will also be discussing the comparisons between marginal and absorption costing and how the concept of activity based costing can also be compared with these. To complete the assignment I will
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We already know that following are the important cost concepts related to the production process of a firm: • Fixed Cost • Varibale Cost • Average Cost • Marginal Cost please refer to following page Introduction to Cost Concepts to understand various cost concepts in detail. Here we will briefly state again the meaning of above stated cost concepts for better understanding of the module on short run cost analysis. Fixed Cost is that cost which does not change (that is either goes up or
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Multiple Choice Questions 16. Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce. A) low‚ little B) low‚ considerable C) high‚ little D) high‚ considerable 17. Would factory security and assembly
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