BU247 Lecture Notes - Lecture 5: Activity-Based Costing
Document Summary
Costing method that assigns overhead and indirect costs to related products and services: each end result (final product - cookies) requires activities (preparation) to produce, each activity (preparation) requires specific resources (oven) to complete. Once you find the cost of each activity you can allocate those activities toward each end result. Approach to activity-based costing (three stage costing system: draw out the diagram, determine the cost of activities (each activity uses resources, which have an input and rate) - inputs are how much each resource is required (hours) Rates are how much each resource costs per units ($/hr) = (1 x ) + (1. 5 x ) + (2 x ) = total activity cost for preparation: determine the cost of the end results (each end result uses activities, which also have an input and. Inputs are how much of each activity is required. Preparation 1 act, processing 2 act, finishing 1. 5 act.
