Chap 5 : ABC Costing

1- Broad averaging :

- Pdt undercosting
- Product overcosting

Pdt cost cross subsidization = if a company undercosts one its products, It will overcost at
least one of its other pdt
 Ex tes au restau tu divises la note en deux mais tas mangé moins que l’autre

- Design product
- Manufacture lenses
- Distribute lenses

2- Refining a costing system = better measurement

How ?

- Trace more costs as direct costs

- Increase the number of indirect-cost pools
- Id cost drivers

3- Activity based costing (ABC) id individual activities as the fundamental source of

indirect costs

4- Cost hierarchies = categorizes various activity-cost pools on the basis of deifferent

types of cost drivers or cost-allcoation bases

Output unit-level costs = costs of activities performed that vary with each individual unit of
the cost object

Batch-level costs = costs of activities that vary with a group of units of the cost object

Product sustaining costs = costs of activities undertaken to support individual pdt or S

Facility sustaining cost