Chapter 1

　　Advanced costing method

　　Chapter learning objectives

　　Upon completion of this chapter you will be able to:

　　§ explain what is meant by the term cost driver

　　§ identify appropriate cost drivers under activity-based costing (ABC)

　　§ 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.

　　§ explain the implications of switching to ABC on pricing, performance management and decision making.

　　§ explain what is meant by the term ‘target cost’ in both manufacturing and service industries.

　　§ derive a target cost in both manufacturing and service industries.

　　§ explain the difficulties of using target costing in service industries

　　§ explain the implications of using target costing on pricing, cost control and performance management.