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(WIP) ACC 350 Exam 1 Study Material

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Pg. 15 Sarah Allison

Pg. 15 Sarah Allison Takash ACC 350, Spring 2018 Exam 1 Study Material Ch. 5 - ABC: Complete List of Terms​ (From end of chapter) Terminology Definitions ​(selected terms) 19. Activity-based costing (ABC) a. A tool for refining a cost system b. Identifies individual activities as cost objects c. For strategic (pricing & product mix) decisions i. Identify all activities in the value chain ii. Calculate all costs of individual activities iii. Assign costs to cost objects on the basis of mix of activities needed d. Illustration of ABC process:

20. Cost hierarchy Pg. 16 Sarah Allison Takash ACC 350, Spring 2018 Exam 1 Study Material a. Categorizes various activity pools i. Basis: 1. Cost-drivers 2. Cost-allocation bases 3. Degrees of difficulty in determining cause-and-effect or benefits received relationships ii. Levels: 1. Output-unit 2. Batch 3. Product/Service-Sustaining 4. Facility-sustaining 21. Traditional Costing a. “​Simple costing system​” or “Peanut-Butter Costing” b. Uses a single indirect cost pool c. Broadly averages cost of resources to cost objects d. Often leads to under/over-costing e. Works best for: i. Limited variety of products ii. Few OH resources used 22. Under-costing a. A product/service is reported as having a lower cost per unit than the level of resources it actually consumes b. Strategic consequences: i. under-pricing ii. Losses on profits 23. Over-costing a. A product/service is reported as having a higher cost per unit than the level of resources it actually consumes b. Strategic consequence: