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Activity-Based Cost
Systems
Chapter 5
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ABC System
Uses activities, for accumulating costs and
redistributing costs
Asks what activities are being performed by the
resources of the service department
Resource expenses are assigned to activities based
on how much of the resource is required or used to
perform the activities
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Management’s Concern
The controller wondered whether the company
should continue to deemphasize the chocolate and
vanilla products and keep introducing new
specialty premium flavors
Ericson’s manufacturing manager commented on
how the introduction of specialty flavors had
changed the production environment
As it was a small company and historically had
produced only a narrow range of products,
Ericson used a simple costing system
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**Total = per
unit X quantity 50,000 40,000 9,000 1,000
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