How Does the Buyer Calculate Cost

question 83

Essay

How does the buyer calculate cost?

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Definitions:

Direct Labour-Hours

The total hours worked directly on the manufacturing of goods or provision of services, often used as a basis for allocating overhead.

Overapplied Overhead

When the allocated manufacturing overhead cost exceeds the actual overhead incurred, resulting in a surplus in the cost coverage.

Activity Cost Pools

Aggregations of all the costs associated with particular activities, used in activity-based costing.

Expected Activity

The anticipated level of operations or output, often used in budgeting and planning.