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Chapter 2

Advanced Costing Methods

Outcome

By the end of this session you should be able to:

 calculate costs per driver and per unit using ABC

 compare ABC and traditional methods of overhead absorption based on
production units, labour hours or machine hours

 derive a target cost in both manufacturing and service industries; explain the
difficulties of using target costing in service industries

 describe the target cost gap; suggest how a target cost gap might be closed

 explain what is meant by the term ‘life-cycle costing’ in a manufacturing industry

 identify the costs involved at different stages of the life-cycle

 explain throughput accounting and the throughput accounting ratio (TPAR) and
suggest how a TPAR could be improved

 apply throughput accounting to a given multi-product decision making problem

 discuss the issues a business faces in the management of environmental costs

 describe the different methods a business may use to account for its
environmental costs

and answer questions relating to these areas.

The underpinning detail for this Chapter in your Integrated Workbook can

be found in Chapter 2 of your Study Text

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