Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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Executive chair
Chairman chair
Upstream costs

€60.00
€146.00 Manufacturing costs

242.50 571.25
Downstream costs

110.00 236.00
Total costs
€412.50
€953.25
11.19 Question from the Association of Chartered Certified Accountants, Pilot Paper 2.4,
Financial Management and Control.
(45 min)
a
General
Activity-based costing (ABC) focuses the mindset of the organisation from processes to activities and in this way, provides a framework to enable management to manage costs by altering activities undertaken. Traditional methods of product costing were often volume related (e.g. hours of labour used, but this did not develop with the growth in activities that had no relation to volume or in multiproduct businesses. There are general conditions under which ABC is most likely to operate and are
• where there is a requirement to apportion costs (e.g. in a multiproduct business
• where there are significant overheads to apportion and
• where the availability of sophisticated information retrieval systems allows management to track product costs as they pass through a production system.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

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