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How Does EVA Differ from Residual Income

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How does EVA differ from residual income?


Definitions:

Traditional Costing

A costing method that allocates factory overhead to products based on volume-related measures, such as labor hours or machine hours.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated manufacturing overhead costs to individual units of product based on a chosen activity base.

Washing Mitt

A glove-like cleaning tool used for washing surfaces, especially in automotive detailing, made of soft fibers to avoid scratching.

Activity-Based Costing

A method of cost accounting that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

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