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(WIP) ACC 350 Exam 1 Study Material

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Pg. 19 Sarah Allison

Pg. 19 Sarah Allison Takash ACC 350, Spring 2018 Exam 1 Study Material Determining the cost of activities Summary: Activities are the prime sources of total indirect cost accumulation. In normal ABC, the cost of activities is measured using ​surveys and interviews​. Budgeted quantities of indirect costs per cost pool are then identified. Calculating cost driver rates Summary: A ​budgeted indirect cost rate​ is determined for each activity, by dividing its associated, homogeneous cost pool by the total budgeted quantity of cost-allocation base related to the activity. ● Example calculation:

29. Steps: Pg. 20 Sarah Allison Takash ACC 350, Spring 2018 Exam 1 Study Material a. Determine the total budgeted indirect costs for an activity/indirect cost-pool b. Determine the total budgeted quantity of the activity’s cost-allocation base c. Divide​ step (a) by step (c): i. ​ total budgeted indirect costs for an activity/indirect cost-pool total budgeted quantity of the activity’s cost-allocation base Assigning activity costs to goods & services Summary: Take the cost-driver rate (budgeted indirect cost rate) and multiply it by the quantity of costallocation base that the individual product or service consumes. 30. Steps: Calculating product cost using the traditional approach Summary: Refer to (#18) “Traditional costing” definition. Simply divide total indirect costs (a single pool) by one single budgeted cost-allocation base. Use this rate to determine product costs by multiplying the rate by the amount of cost-allocation base consumed by the particular product. Calculating product cost using ABC Summary: