From the course: Accounting Foundations: Managerial Accounting
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Analyzing overhead
From the course: Accounting Foundations: Managerial Accounting
Analyzing overhead
- Okay, so the next step is to analyze individual overhead costs in terms of the cost activities we just identified. for Lilly Ice Cream Company, recall that the total overhead cost is 1.74 million created by four different activities. The components of the overhead costs and the four activities are shown here. Implementation of the ABC system now requires that each of the overhead costs be analyzed to determine what fraction of those costs is caused or driven by each one of the four overhead cost activities. Consider the first item on the list. Electricity costs $200,000. The use of electricity is a good example of a unit level overhead activity because the more units that are produced, the higher the electricity costs. In terms of Lilly's analysis, the electricity cost is part of the cost of operating the ice cream production process. Accordingly, the $200,000 in electricity cost is included as part of the cost of…
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Contents
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The real cost of ice cream2m 48s
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(Locked)
Introduction to activity-based costing4m 5s
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(Locked)
The basics of activity-based costing3m 4s
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(Locked)
Identifying overhead cost activities3m 59s
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(Locked)
Analyzing overhead3m 5s
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(Locked)
Identifying cost drivers2m 54s
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Assigning production overhead2m 40s
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Doing the math to influence your decisions2m 57s
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