Ch 18 - ABC Flashcards Preview

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Flashcards in Ch 18 - ABC Deck (5)
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1
Q

Four steps to Activity Based Costing

p883

A
  1. Activity : identify the activities, estimate total indirect cost for each
  2. Cost driver : identify cost driver for each activity, estimate total quantity of the allocation base
  3. Allocation rate : compute Cost Allocation Rate
    Allocation rate = est. total indirect cost / est. total quantity
  4. Indirect cost : allocate indirect cost to the activity
    Activity cost = cost allocation rate x actual quantity
2
Q

ABC stands for

A

Activity Based Costing

3
Q

Allocation rate = …

A

Allocation rate = est. total indirect cost / est. total quantity

4
Q

Activity cost = ….

A

Activity cost = cost allocation rate x actual quantity

5
Q

Target pricing = …

Cost-based pricing = ….

A

Target pricing = target sales price - desired profit (aims low)

Cost-based pricing = full product cost + desired profit
(aims high)