ACTIVITY-BASED COSTING MODEL I. Definition Activity based costing (ABC) is an accounting method that identifies the activities a firm performs creating the real cause of the overhead‚ and then assigns the indirect costs of those activity only to the products that are actually demanding the activities. An activity based costing (ABC) system recognizes the relationship between costs‚ activities and products‚ and through this relationship assigns indirect costs to products less arbitrarily than
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Production Editor: Carol O’Rourke Text Permissions Coordinator: Tracy Metivier Senior Operations Specialist: Diane Peirano Art Director: Anthony Gemellaro Cover Design: Anthony Gemmellaro Cover Illustration/Photo: © Image Source/Corbis Composition/Full-Service Project Management: S4Carlisle Publishing Services/Lynn Steines Printer/Binder: Edwards Brothers Cover printer: Lehigh-Phoenix Color/Hagerstown Typeface: 10/12 Palatino Credits and acknowledgments borrowed from other sources and reproduced
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Cost Theory in Economics A central economic concept is that getting something requires giving up something else. For example‚ earning more money may require working more hours‚ which costs more leisure time. Economists use cost theory to provide a framework for understanding how individuals and firms allocate resources in such a way that keeps costs low and benefits high. 1. Function * Economists view costs as what an individual or firm must give up to get something else. Opening a
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Aero Gear Inc.: Performance Measurement‚ Cost Management and Product Costing in a Lean Transition 1. Millist liiki ettevõte on Aero Gear? Milline on nende konkurentsi olukord juhtumis kirjeldatud hetkel? Aero Gear is a small private owned (family business) precision-machining company ‚ which supplies the aerospace industry. Aero Gear’ s customers were engaged in fierce competition for market share in the commercial aerospace sector. They pressed for cost reductions from their suppliers (Aero
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Activity-Based Costing Activity-Based Costing Activity based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity. Activity based costing is a subset of activity-based management. Activity based costing is used to determine product costs and for internal decision-making and for managing activities. Traditional Absorption costing is for external financial reporting. Activity-based costing is a suitable
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Advantages and disadvantages of variable costing Many managers use variable costing for internal reporting and decision making since it has number of advantages (Myers par. 1). First‚ on variable costing reports costs are organized by behavior which makes it easier to understand. Also‚ variable costing statements facilitate cost volume profit (CVP) analysis because it separates cost behavior by fixed and variable. Under variable costing‚ changes in inventory or production do not affect the
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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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Similarity ! basic data source same End result ! ends with financial statements ! integral part of other business aspects B. Cost Accounting Terminology 1. Nature of Cost Cost - A sacrifice of resources: Cost is a measurement in monetary terms of the amount of resources used for some purpose. Expense - The cost charged against revenue in a particular accounting period. 2. Purposes of Gathering Cost Information Routine decision
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Fuentes English 12/4/12 The People to Blame for the Reason Why the Titanic Sank Do you ever think about the Titanic? Do you ever think about who was responsible for the Titanic sinking? Whose fault it was? Most people believe it was Captain Smith’s fault the Titanic sank. But it wasn’t just the captain’s fault it was different other people too. Other had a part in this wreck such as Captain Smith‚ the designer- Thomas Andrews‚ the captain of the Californian- Captain Lord‚ and the Titanic’s
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There are several methods in preserving fish. Fish preservation involves Chilling and Freezing‚ Salting‚ Fermentation‚ Drying and Dehydration‚ Smoking‚ Pickling and Spicing‚ and Canning There are several methods in preserving fish. Fish preservation involves Chilling and Freezing‚ Salting‚ Fermentation‚ Drying and Dehydration‚ Smoking‚ Pickling and Spicing‚ and Canning. There is one thing first to consider‚ make sure that the fish that is going to be preserve is new and still fresh. The
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