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Key Terms of Activity-Based Costing (ABC) : Process Activities Include Machine Products and Assembled Products
Key Terms of Activity-Based Costing (ABC) : Process Activities Include Machine Products and Assembled Products
EXAMPLE: Dragon Furniture Company has identified activity centers to which overhead costs are
assigned. The following data is available:
The following are the company’s products and other operating statistics:
Step 2. Determine the product costs by allocating the overhead or activity centers to the cost of
activity drivers using the computed pool rates:
Product A Product B Product C TOTAL
Utilities:
A. 30,000 X 5 P150,000
B. 10,000 X 5 P50,000
C. 20,000 X 5 P100,000
P300,000
Scheduling and Setup:
A. 130 X 350 45,500
B. 380 X 350 133,000
C. 270 X 350 94,500
P273,000
Material Handling:
A. 500,000 X .40 200,000
B. 300,000 X .40 120,000
C. 800,000 X .40 320,000
P640,000
TOTAL P395,500 P303,000 P514,500 P1,213,000
References
AccountingExplained. (n.d.). Activity-based costing. Retrieved on October 02, 2018, from
https://accountingexplained.com/managerial/cost-systems/activity-based-costing
Lalitha, R. & Rajasekaran, V. (2010). Costing accounting. India: Pearson.