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A snapshot of the summary - Samenvatting FIDM
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1 Eigen flashcards lecture 1, 2, 3
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Indirect costs are related to a particular cost object but cannot be traced to it because- cost element is shared among cost objects (common costs)
- physically impossible to trace
- not cost effective to trace -
Criticism traditional allocation method- Assumes all overhead is volume related
- Organization-wide or departmental rates all related to single activity measure
- Departmental focus, not process focus
- Focus on costs incurred, not cause of costs -
Over-absorbed overhead/over-recovery of overheadActual overhead < absorbed overhead
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Cost allocations act asan internal tax system
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Joint costing: Physical measurement methodDetermine weighing of joint cost allocated accordingly with production in kg
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Joint costing: Sales value at split-off methodDetermine weighing of joint cost allocated accordingly with sales value
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Variable costing (=direct costing/marginal costing)Excludes fixed costs from product costs and writes them off in the year that the costs are incurred.
Operating income = sales x (price - full costs) + (actual production - normal production) x fixed OH rate -
Dysfunctional effect under absorption costing:- Managers can defer recognition of fixed manufacturing costs by building ending inventory
- Incentive to over-produce -
For which type of costing does level of sales determine break-even pointVariable costing
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Examples batch-related activitiesset-ups, purchase ordering and first-item inspection activities
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The following topics are covered in this summary
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variance, variable, cost
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costs, cost, manufacturing
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overhead, costs, cost
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costs, cost, pricing
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process, cost, costs
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costs, joint, method
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costing, activity, capacity
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profit, sales, fixed
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costs, cost, decision
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costs, product, firm
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cost, resources, activity
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value, outcomes, information
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rate, investment, irr
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standard, costs, costing