Summary Activity-Based Costing and Activity-Based Management
12 views 0 purchase
Module
Cost Accounting
Institution
Universitas Indonesia
Book
Horngren\'s Cost Accounting
It contains summary of chapter 5 of "Cost Accounting: A Managerial Approach" book from Charles T. Horngren, Srikant M. Datar, and Madhav V. Rajan. It is written concisely based on learning objectives of the chapter.
COST ACCOUNTING: A MANAGERIAL EMPHASIS, 16E, GLOBAL EDITION (HORNGREN)|CHAPTER4,5&9 || QUESTIONS AND CORRECT ANSWERS 2024|A+ GUARANTEED|100%PASS|ALL CHAPTERS AVAILABLE
Cost Accounting A managerial Emphasis 16 Edition Latest Update Questions and Verified Correct Answers Chapters and 2
Complete Solution Manual Horngren’s Cost Accounting A Managerial Emphasis 16th Edition Questions & Answers with rationales (Chapter 1-23)
All for this textbook (11)
Written for
Universitas Indonesia
Accounting
Cost Accounting
All documents for this subject (4)
Seller
Follow
kennywiyarta
Content preview
CHAPTER 5: ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
Document Type : Book Summary
Source : Cost Accounting: A Managerial Emphasis 15th Edition by Charles T.
Horngren, Srikant M. Datar, and Madhav V. Rajan
Learning Objective 1 : Explain How Broad Averaging Undercosts and Overcosts
Products or Services
As product diversity and indirect costs increased, broad averaging led to inaccurate
product costs. That’s because simple peanut-butter costing broadly averages or spreads
the cost of resources uniformly to cost objects when, in fact, the individual products or
services use those resources in nonuniform ways.
Broad averaging often leads to undercosting or overcosting of products or services. This
can lead to certain strategic consequences, as follows. Suppose a manager uses cost
information about products to guide pricing decisions. Undercosted products will be
underpriced and may even lead to sales that actually result in losses because the sales
may bring in less revenue than the cost of resources they use. Overcosted products will
lead to overpricing, causing those products to lose market share to competitors
producing similar products. But what if prices are determined by the market based on
consumer demand and competition among companies? In this case, product
undercosting and overcosting cause managers to focus on the wrong products. Managers
give greater attention to overcosted products that show low profits when in fact costs and
profits from these products are perfectly reasonable. They give less attention to
undercosted products thinking they are highly profitable, when in fact these products
consume large amounts of resources and are far less profitable than they appear.
Learning Objective 2 : Present Three Guidelines for Refining a Costing System
There are three main guidelines for refining a costing system:
Direct-cost tracing - Identify as many direct costs as is economically feasible;
Indirect-cost pools - Expand the number of indirect-cost pools until each pool is more
homogeneous;
Cost-allocation bases - Whenever possible, managers should use the cost driver as
the cost-allocation base for each homogeneous indirect-cost pool.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller kennywiyarta. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.06. You're not tied to anything after your purchase.
