Assignment task: Use this lecture outline/guide to add notes from your reading under each topic. Include references to examples, exercises and problems that illustrate the concept.
1. How is a predetermined overhead rate used in costing products or services?
2. What is activity-based costing?
3. Activity-based costing (ABC) makes use of multiple predetermined overhead rates. Why might this be better than using one predetermined overhead rate?
4. What is meant by an activity? Give 3 examples of activities.
5. Cost drivers need to be determined for each activity being used. What is meant by a cost driver?
6. Give 3 examples of activities and a possible cost driver for each.
7. Provide a numerical example of calculating the predetermined overhead rate per activity when ABC is used. Use an example where at least 3 separate activities and drivers are identified.
8. Once the predetermined overhead rates are calculated, they are used to apply manufacturing overhead to products. Describe how this is done using the actual level of the driver (machine hours, number of setups, etc.)
9. Select an example or problem from the text that illustrates the calculation and application of activity based predetermined overhead rates and copy it here.
10. Compare the two methods - one predetermined overhead rate vs. activity-based costing where there are multiple rates used