Outline of an abc system, Cost Accounting

Assignment Help:

Outline of an ABC System

An ABC costing system operates like given:

Step 1

Find out an organization's major activities.

Step 2

Find out the factors that identified the size of the costs of an activity/cause of the costs of an activity.  These are identified as cost drivers.  See at the given examples:

 Activity

 Possible cost driver

 Ordering

 Number of orders

 Materials handling

 Number of production runs

 Production scheduling

 Number of production runs

 Dispatching

 Number of dispatches

For those costs that vary along with production levels in the short term, ABC employs volume-related cost drivers as like machine or labour hours.  The cost of oil employed a lubricant on the machines would hence be added to products on the basis of the number of machine hours as oil would have to be employed for each hour the machine ran.

Step 3

Collect the costs of all activity into what are identified as cost pools or equivalent to cost centers beneath more traditional costing methods.

Step 4

Charge support overheads to products upon the basis of their usage of the activity. A usage of usage of an activity is measured via the number of the activity's cost driver it generates.


Related Discussions:- Outline of an abc system

Calculate cost of direct manufacturing labour, Dixon Corporation was establ...

Dixon Corporation was established on January 1, Year 1.  The firm has 2 divisions, Division A and Division B.  Division A manufactures standard carpets, and Division B manufactures

Margin safety ratio, Small Steps sells step stools. Their budget informatio...

Small Steps sells step stools. Their budget information is shown below. selling price: $40 per stool Variable expense:$30 per stool Fixed Expense:$24,000 use the above inform

Distinction between absorption and marginal costing, Distinction between Ab...

Distinction between Absorption and Marginal Costing These are two approaches of arriving at the cost of production or total profit for a specified period. The major difference

Job costing, Job Costing This is a costing method that is applied whe...

Job Costing This is a costing method that is applied when a job or cost unit is relatively of small size, is undertaken to fit the customer's specifications and is of compara

Labour cost, labour cost related case study with solution

labour cost related case study with solution

Standard cost and standard costing, Standard Cost and Standard Costing ...

Standard Cost and Standard Costing To effectively control the costs of a certain organization, we require a yard stick to measure the real performance against. Traditionally,

Calculate operating income under throughput costing, The follow data relate...

The follow data relates ot year 20XX for Plano Manufacturing Company: Units produced - 2,000 Units sold - 1,800 Selling price - $200 / per unit Direct material costs - $80,000 Dire

Evaluate outstanding balance, Winston Duff is planning to borrow $225,000 ...

Winston Duff is planning to borrow $225,000 to purchase a new home. Mr. Duff is considering two fixed-rate financing alternatives offered by Horsepen Creek State Bank. The first

What is the predetermined overhead rate, Morrow Company applies overhead ba...

Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor h

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd