Explore BrainMass

Explore BrainMass

    ABC: Why do manufacturing overhead costs shift from high to

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    When activity based costing is used, why do manufacturing overhead costs often shift from high-volume products to low-volume products? What type of costs should not be assigned to products in an ABC system?

    © BrainMass Inc. brainmass.com June 4, 2020, 2:01 am ad1c9bdddf
    https://brainmass.com/business/accounting/shifting-manufacturing-overhead-costs-433044

    Solution Preview

    Activity based costing (ABC) assigns overhead to products based on the resources they are consuming. So, low-volume products have to absorb all the set-up and clean-up of the process across a lower number of units versus high-volume products.

    Example:
    You have two batches that need to be baked:
    50 pounds of specialty coffee
    5,000 pounds of generic coffee
    The baking costs are $100 per hour. The specialty coffee costs per ...

    Solution Summary

    Your tutorial is 342 words and includes an example of how low-volume product costs increase under activity based costing (ABC) and why fixed costs should not be assigned to products under ABC costing systems.

    $2.19

    ADVERTISEMENT