Question

what types of costs should not be assigned to products in an activity based costing system explain

Answer 1

Generally all costs are assigned to a product in activity based costing but following are few costs which should not be assigned:

1. Customer level costs: These are the type of costs which are related to selling , e.g. order processing, invoicing etc.These are not assigned to a product because these are not incurred for production of a product.

2. Organization sustainig costs: These are the costs which are incurred for making the organization sustain . e.g. property taxes, insurance etc. These should not be assigned because these are not incurred for individual product and decision regarding any particular product is not taken on the basis of these costs.

3. Cost of idle capacity: These should not be assigned because the resources are not utilized by the product and hence not appropriate to aasign to the product.