Asked by Laney Ankney on Apr 30, 2024
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Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products using activity-based costing than traditional costing which is based entirely on direct labor-hours.
Product Diversity
The range of different products or services offered by a business to meet various customer needs and market demands.
Overhead Resources
All indirect costs involved in running a business that cannot be directly attributed to a specific product or service.
Activity-Based Costing
An accounting approach that assigns costs to products or services based on the resources they consume, aiming to provide more accurate insights into cost drivers and profitability.
- Recognize the impact of ABC on product and overhead costs, including shifts in cost allocation between high and low volume products.
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Learning Objectives
- Recognize the impact of ABC on product and overhead costs, including shifts in cost allocation between high and low volume products.
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