Manufacturing Overhead and ABC Flashcards

• Manufacturing (or factory) overheads
• Nonmanufacturing overheads

Overheads related to the production process, such as factory rent and electricity.

Overheads not related to the production process, such as accounting, advertising, sales, legal counsel, and general corporate administration costs.

• Direct materials
• Direct labor
• Manufacturing (or factory) overhead

Because overhead costs are not directly traceable to specific products, making their allocation essential for accurate cost determination and pricing.

• Indirect materials
• Indirect labor
• General manufacturing overheads

Costs that change in total as the level of activity changes, with a per-unit cost assumed to remain the same.

Costs that do not change with changes in activity as long as the activity remains within the relevant range.

Costs containing elements of both fixed and variable costs, such as electricity.

Grouping all manufacturing overhead costs into a cost pool and allocating them based on a single cost driver, such as direct labor hours or machine hours.

A method using multiple cost pools and cost drivers to allocate overhead based on specific activities, not conforming to GAAP in its pure form.

A measure of activity, such as direct labor hours or machine hours, used to assign costs to cost objects.

Allocating all overhead costs for the whole plant using one cost pool and one allocation base.

Allocating overhead costs using separate cost pools for each department, with each department using its own allocation base.

The amount of manufacturing overhead charged to each unit of a product for each unit of the allocation base.