Transcription of Chapter 5: Activity-Based Costing (ABC) & Activity-Based ...
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Chapter 5: Activity-Based Costing (ABC) & Activity-Based ...
Chapter 5: Chapter 5: Activity-Based Costing (ABC)& Activity-Based Management (ABM)H 13 5 -1 Horngren 13eA SIMPLE Costing SYSTEM5-2AN Activity-Based Costing SYSTEM5-3 ABC s 7 StepsStep 1:Identify the products that are thechosen cost :IdentifythedirectcostsoftheproductsStep 2 3:Select theactivities and cost-allocation basesto 4:Identifytheindirect costsassociated with each cost-allocationbase( activity ).allocation base( activity ).Step 5:Compute therate per unitof each cost-allocation base( activity )used to allocate indirect costs to the(y) 6:Compute the indirectcosts allocatedto the 7:Compute thetotal costs of the productsby adding alldirect and indirect costs assigned to the HIERARCHIESIn an ABC system, costs are categorized on the basis of the different types of cost drivers utilized. ABC systems commonly use a cost hierarchy havingyyygfour levels.
Output unit-level costs are the costs of activities performed on each individual unit of a product or service. – These costs increase as the number of units produced increases. Batch-level costs are the costs of activities related to a group of units of products or services rather than the individual unit.
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