Archive for July, 2011


Back to Overhead Allocation?

Back in college cost accounting, a major project entailed creating a manufacturing organization with at least three products. Life was simple then. I created the required products complete with standards for selling price, material cost, labor cost, and volumes for sales and production. You cannot manufacture without overhead, so I created a couple of overhead […]

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How to Allocate Information Technology Expense?

With today’s technology trends, Information Technology or IT has become much more significant to business operations. In the past, the cost of IT was a small, almost trivial, share of overhead. Now IT has become a significant part of corporate overhead. No longer trivial, businesses now want to know how to relate IT to products […]

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The Activity Dilemma in ABC: Conflict Between Process and Task

An activity is an essential link between what a business spends on its resources and what it delivers as products and services to customers. Activities are the work performed by employees. This link can be viewed as a stepping stone on a path the business follows to add value as it converts inputs into saleable […]

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Non Value-Adding Activities – A Great Concept Comes With Hurdles

The central power of Activity-Based Costing is the activity. An activity is the work that people do in the company. An activity is a key link between resources, represented by what we spend, and products or services that we sell, represented by revenue.

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