Chap 4

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  1. What are some examples of production overheads in 1: Manufacturing business 2: Service business
    • 1. Repair of machinery
    • rent of factory buildings
    • safety procedures

    • 2. Cost of transport to jobs
    • Replacement of tools
    • Protective clothing
  2. Describe allocate and apportion?
    • Fair to all parties
    • representative of benefit
    • relatively quick to apply
    • Understandable

    • Allocate; Means assign whole item of cost to single cost unit
    • Apportion; Means spread cost over two or more cost units
  3. What are som methods of absorbing overheads?
    • Cost per direct labour hour
    • Cost per machine hour
    • Cost per € of labour cost
    • Cost per unit
    • Predetermined overhead rates
  4. Describe Activity-based costing and its stages?
    • A method of allocating overhead costs to products and services.
    • Asks the question: what drives cost?

    • 1. Identify activities
    • 2. Identify cost drivers that influence the cost of an activity
    • 3. Create a cost pool for each activity
    • 4. Allocate costs to products using drivers for each activity
  5. Describe the traditional approach to flow of overhead costs and its stages?
    • Identify overhead costs and identify cost centres that accumulate costs
    • 1. Allocate indirect costs to cost cetres
    • 2. Apportion service cost centre to production cost centres
    • 3. Absorb overhead cost into product
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Chap 4
2012-12-29 14:58:27


Chap 4
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