Activity Based Costing

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Title: Activity Based Costing

Essay Details:

Subject: Miscellaneous

Author: George H

Date: July 10, 2015

Level: University

Grade: A

Length: 9 / 2565

Essay text:

When using Traditional Cost Accounting, the sum of a company's overhead is allocated among products based on some sort of volume measure. The most commonly used volume measures are labor hours and machine hours. The assumption in TCA is that there is a direct relationship between overhead and the volume of output based on the volume measure (Value Based Management, 2005). Since an exact number for overhead cannot be determined until the end of the period (whether that period is a month, quarter, or year) a predetermined factory overhead rate must be used to apply overhead to products. This is done by estimating the overhead for the period, and then dividing it by the estimate of the volume measure for that particular period (Delphis Financial Management and Consulting, 2005)...

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