Activity Based Costing: Activity Based Costing refers to the allocation of the factory overheads when there are numerous products and processes. Activity based costing aims at assigning the costs among the products in a proportionate way. Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product. To Calculate: The activity based overhead rates for each activity cost pool.
Activity Based Costing: Activity Based Costing refers to the allocation of the factory overheads when there are numerous products and processes. Activity based costing aims at assigning the costs among the products in a proportionate way. Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product. To Calculate: The activity based overhead rates for each activity cost pool.
Solution Summary: The author explains how to calculate the overhead costs charged to the in-house manufacturing department.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
Chapter 4, Problem 4.2BYP
a)
To determine
Activity Based Costing: Activity Based Costing refers to the allocation of the factory overheads when there are numerous products and processes. Activity based costing aims at assigning the costs among the products in a proportionate way.
Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.
To Calculate: The activity based overhead rates for each activity cost pool.
b)
To determine
Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.
To Calculate: The overhead costs charged to the in-house manufacturing department.
c)
To determine
Overhead: Overhead refers to the costs, which are utilized in business activities, however cannot be related to a specific activity or product.
To Calculate: The overhead costs charged to the outside contracts.
d)
To determine
Activity Based Costing: Activity Based Costing refers to the allocation of the factory overheads when there are numerous products and processes. Activity based costing aims at assigning the costs among the products in a proportionate way.
To Identify: The benefits of charging overhead costs to both in-house manufacturing department and the outside contracts, using activity-based costing.
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