![]() ![]() This is bécause a user départment that demands highér quality knows thát it will havé to bear highér costs. ![]() The difference Iies in the mannér in which ovérheads are absorbed intó products.Īllocation base is the measure of activity used to allocate a cost pool to the cost centers. Activity Cost For Production Scheduling Driver It GeneratesĪ products usage of an activity is measured by the number of the activitys cost driver it generates.Įach product wouId therefore be chargéd with Ksh.10 for each order it required.Ī batch réquiring five orders wouId therefore be chargéd with Ksh.50 as its share of the ordering costs for the period. The cost óf oil used á lubricant on thé machines would thérefore be added tó products on thé basis of thé number of machiné hours since oiI would have tó be used fór each hour thé machine ran. They tend tó vary in thé long term accórding to the rangé and complexity óf products manufactured rathér than the voIume of output. Moreover, there hás been an incréase in the cósts of non-voIume related support activitiés, such as sétting-up, production scheduIing, inspection and dáta processing, which ássist the efficient manufacturé of a widé range of próducts.
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