Class 4-Chapter 6 (1)

School: University of Houston, Downtown - Course: ACC MISC - Subject: Accounting

Activity-Based Costing (ABC) 2 Involves determining the cost of activities and tracing their costs to a cost object on the basis of the cost object's use of the activity Underlying premises Activities drive costs Costs should be assigned to products/services in proportion to the volume of activities they consume Assigned toCosts of ResourcesReassigned to* Activity PoolsCost Objectives 2

COST OBJECT/COST DRIVER 3Cost Object - A product or service provided to a customer Can be a customer A revenue-producing event for which management wants to know the cost Cost driverfor a CPA is: Cost driver for bussing activity in a restaurant is:

Activity-Based Costing (ABC) 4Activities performed to fill customer needs consume resources that cost money. The cost of resources consumed by activities should be assigned to cost objects on the basis of the units of activity consumed by the cost object.