ACC 100 Lecture Notes - Lecture 6: Quality Costs, Activity-Based Costing, Cost Driver

• School: Ryerson University
• Department: Accounting
• Course: ACC 100
• Professor: Richard Deklerk

Document Summary

Chapter 7 activity based costing and management. These measure and rates produce average costs that over or understate individual product costs. Unit-level activities: activities performed each time a unit is produced. Non-unit-level activities: activities that are not performed each time a unit is produced. Vary with some other factors other than units and identifying such will be helpful in predicting and managing these costs. Calculating consumption ratios: calculate activity rates (cost/activity) The process of assigning overhead costs to various cost categories related to the nature of the aactivity that causes these costs: batch-level, product-sustaining and facility sustaining. We can more accurately assign these costs to the products being produced. Each cost pool will have its own predetermined overhead application rate and will be assigned to products based on that specific cost driver. Identify activities, activity measures, cost pools and cost drivers. Assign overhead costs to cost objects using the activity rates and activity measures.