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A cost driver in activity-based costing (ABC) is a factor that influences or contributes to the cost of an activity. It is a measurable variable that directly correlates with the level of activity performed, such as machine hours, labor hours, or the number of setups. By identifying cost drivers, organizations can more accurately assign costs to products or services based on their actual consumption of resources. This helps in better decision-making and cost management.
What else can I help you with?
Activity-based costing is a means of more accurately accounting for direct labor cost?
False. Activity-based costing is used to allocate indirect cost into direct costs.Regardng direct cost, traditional costing is as appropriate as activity-based costing.
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.
What are the tools and techniques of cost management?
Activity based Costing, Target costing, Just in Time,Total Quality Management,
What are the differences between activity-based absorption costing system and traditional absorption costing system?
An activity-based absorption costing system defines the cost by how many activities a product unit uses. A traditional absorption costing system defines the cost by how much money went into making the product unit.
How do activity-based costing and the traditional cost system treat idle capacity costs differently?
Traditional costing system allocates the idle capacity cost to completed units while activity based costing only allocates the cost of capacity which is utilized while remaining capacity is expensed to income statement as period cost.
Activity-based costing is a means of more accurately accounting for direct labor cost?
False. Activity-based costing is used to allocate indirect cost into direct costs.Regardng direct cost, traditional costing is as appropriate as activity-based costing.
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.
How would you describe activity based costing?
Activity-based costing is a form of cost refinement, designed to obtain greater accuracy than traditional allocations in cost assignments for product costing and decision-making purposes.
What are the tools and techniques of cost management?
Activity based Costing, Target costing, Just in Time,Total Quality Management,
What are the differences between activity-based absorption costing system and traditional absorption costing system?
An activity-based absorption costing system defines the cost by how many activities a product unit uses. A traditional absorption costing system defines the cost by how much money went into making the product unit.
How do activity-based costing and the traditional cost system treat idle capacity costs differently?
Traditional costing system allocates the idle capacity cost to completed units while activity based costing only allocates the cost of capacity which is utilized while remaining capacity is expensed to income statement as period cost.
How is activity based costing better than traditional cost assignment systems?
Activity-based costing tries to take the nonuniformity of resource consumption across products into account in the assignment of costs.
Why activity based costing?
Activity based costing allocate the overhead expenses based on activities performed and that's why it is an accurate way to allocate overhead expenses while in absorption costing, overheads are allocated based on some ratios or predetermined rate which is not accurate method of allocation of cost.
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.
How much overhead cost would be assigned to Product I90W using the activity-based costing system?
To determine the overhead cost assigned to Product I90W using an activity-based costing (ABC) system, you would first need to identify the relevant activities associated with Product I90W and their respective cost drivers. Then, calculate the overhead rates for each activity by dividing the total cost of each activity by the total units of the cost driver. Finally, multiply the overhead rate by the number of units of each cost driver used by Product I90W to find the total overhead cost assigned to it. Without specific data, the exact cost cannot be calculated.
What are the two stages of allocation in activity-based costing?
Identifying the activities and identification of cost drivers
What is the first step in activity based costing?
Costs are assigned to activities from resource cost pools.
