Management Accounting Ch04

Even in today’s automated environment, direct labor is sometimes the appropriate basis for assigning overhead cost to products.

Chapter 4

In the first stage of activity-based costing, overhead is assigned to products using cost drivers.

Chapter 4

The first step in activity-based costing is to identify and classify the major activities involved in the manufacture of specific products, and allocate manufacturing overhead to the appropriate cost pools.

Chapter 4

Before costs are allocated to the cost pools, the cost drivers for each cost pool must be identified.

Chapter 4

Under ABC, overhead costs are shifted from the high-volume product to the low-volume product.

Chapter 4

Activity-based costing does not change the amount of overhead costs, but it does allocate those costs in a more accurate manner.

Chapter 4

Overhead costs are not allocated by means of arbitrary volume-based cost drivers under ABC.

Chapter 4

Value-added activities increase the worth of a product or service to customers and involve resource usage that customers are willing to pay for.

Chapter 4