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Justyna Waligora
on Nov 12, 2024

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When activity-based costing is used, the flow of costs through the accounts is similar to a system using one plantwide overhead application rate other than the overhead costs are applied using multiple predetermined overhead rates.

Activity-based Costing

Activity-based costing allocates overhead and indirect costs to specific activities related to the production of goods or services, providing more accurate product costing.

Plantwide Overhead Application Rate

A single overhead absorption rate used across an entire plant or facility to allocate overhead costs to products.

Predetermined Overhead Rates

A rate used to allocate indirect costs to products or projects, calculated at the beginning of an accounting period based on estimated overheads and activity levels.

  • Understand the concept and application of activity-based costing.
  • Contrast traditional costing methodologies with those of activity-based costing systems.
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Aaron BhaskarNov 13, 2024
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