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What happens Cost driver activity level increases within the relevant range?
Wiki User
∙ 12y ago
total fixed costs remain unchanged
Wiki User
∙ 12y ago
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How does Activity-Based Costing work?
Activity-based costing (ABC) systems for applying overhead is a two-stage procedure.The first step begins with identifying significant activities in the production of the products (that is grouping similar activities into an activity pool) and assigning a cost to that pool according to the amount of resources consumed by the activity pools.In the second step:A cost driver (an event that results in the incurrence of cost) is identified and quantified ($$$) for eachactivity pool.A pool rate is computed for each activity by dividing the cost of each activity pool by the respective cost driver quantity.The activity cost for each product line is determined by multiplying the pool rate by the cost driver quantity incurred by each product line.Finally, to arrive at the activity cost per unit of product the activity cost for each product line is divided by each product line's production volume.The advantage of this system of applying cost is that it fairly and reflectively distributes cost among products because of the incorporation of multi cost drivers. At each step of the production (activity pools), there is a cost driver that has a rate that reflects the cost of producing with that activity. Thus by the end of the production, the costs assign are reflective of the process and costs.Hope that answers your question :)
An accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost driver is?
Activity-based costing.
Explain how a activity based flexible budget differs from a conventional flexible budget?
there are some difference among activity based flexible budget and conventional fllexible budget, the main differ is number of cost driver that use to allocat OHC, so my dissertation about this subject
What are the steps involved in implementation of Activity Based Costing?
The implementation of Activity Based Costing is not simple, easy & direct as is the case with traditional costing. It requires proper steps or techniques to be followed, which are listed as follows:Step 1: Identification and classification of the activities related to the company's products. Activities in all areas of the value chain (product design, production, marketing, distribution, etc.) must be included. Activity dictionary is prepared, which includes all the activities that a company performs to produce its product or service. The activity dictionary can be prepared in different ways, including interviewing the employees who perform the activities. After the identification of activities, they are classified as unit level, batch level, product level, customer level or facility level.Step 2: Estimation of the cost of activities identified in step 1. Estimate the costs of specific activities that generate costs. These costs are for both human resources, such as employee labor for production and machine maintenance, and physical resources, such as the cost of machinery and building occupancy. Information must include employee data from personnel interviews and financial data from the accounting department. Then the total cost of each activity is calculated.Step 3: Calculation of cost-driver rate for each activity. The activity cost data from step 2 is used to calculate a cost-driver rate that the company can use for assigning activity costs to goods and services. This rate should use a base that has some causal link to the cost. That base is called activity drivers. For example, the costs of running a production machine are likely to be caused by the number of hours it runs. Thus, choosing a rate for this activity based on machine hours is appropriate.Step 4: Assign activity costs to products. The cost-driver rates prepared in step 3 are used to assign activity costs to goods and services. For example, if a particular product uses 1.5 machine hours in production and the rate from step 3 is $50 per hour, the product is assigned $75 based on its machine usage.After the completion of the four steps mentioned above, a company can compute the cost of overheads provided to existing goods and services, which can be used to understand the profitability of each product in a better way. The activity-based costing data could also be used to estimate the cost of future products.
Example of cost driver?
cost driver examples
When a driver pumps up the tyres of a car what happens to the pressure inside the tyres?
The pressure increases.
What is cost driver and cost pool?
Cost driver is the basic activity which increases the or utilize the cost while cost pool is that in which all costs are jointly shown for example machine setup cost is cost driver while over all overheads is cost pool.
How would you define an activity driver?
An activity driver measures the frequency or intensity with which a cost object requires the use of an activity, thereby relating the performance of an activity's tasks to the needs of one or more cost objects.
How would you define a cost driver?
The term "cost driver" refers to the activity that causes cost to change.
An open parachute increases air resistance of a falling sky driver by?
Increasing his surface area
What happens to you when an uninsured unlicensed driver driving your car has an accident?
Is your car insured? Did the driver have your permission? more that likely there will be coverage, (subject to any policy exclusion), but you will obviously have rate increases that will take many years to clear up. If your vehicle is also not insured, you will more than likely be held (assuming driver had permission), equally responsible for all costs, not to mention fines, loss of plates etc.
What does cost allocation mean?
a factor that determines the cost of an activity. Cost drivers are analyzed as part of activity based costing and can be used in continuous improvement programs. They are usually assessed together as multiple drivers rather than singly. There are two main types of cost driver: the first is a resource driver, which refers to the contribution of the quantity of resources used to the cost of an activity; the second is an activity driver, which refers to the costs incurred by the activities required to complete a particular task or project.
The definition of Taxi Driver is what?
An individual that is paid to transport individuals, or fares, to different destinations in a given area. The cost of a fare increases as time spent in transit increases.
When filling out your Driver's Daily Log for your lunch in the remarks section you need to include?
Location and activity.
Velocitation happens when a driver may unconsciously be?
Speeding up
What happens to the driver in AZ for a passenger with an open container?
You get arrested
What happens if you let an underage driver drive your rental car?
you will
