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ABC Cost Hierarcy

Forums › Ask CIMA Tutor Forums › Ask CIMA P2 Tutor Forums › ABC Cost Hierarcy

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by Cath.
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  • May 20, 2018 at 9:38 pm #453045
    simphiwe26
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    In my understanding general principal of ABC is to allocate manufactory overhead and administration costs and deprecation are not manufactory overheads

    My question is so why do they part of Facility level cost in ABC?

    Regards
    Simphiwe

    May 30, 2018 at 2:27 am #454732
    Cath
    Member
    • Topics: 0
    • Replies: 423
    • ☆☆☆

    Hi.

    The question was intending to refer to administration needed to support the manufacturing process and depreciation already states that this is related to the plant/ machinery.

    These are both production overheads – but can not be associated with unit, batch or product line activities – so they are facility (general overheads) and may need to be allocated to the product on an arbitrary basis ( such as machine hours).

    Kind Regards
    Cath

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