MANAGERIAL ACCOUNTING FOR
MANAGERS 6TH EDITION 2026 CAPITAL
BUDGETING INVESTMENT APPRAISAL AND
CASH FLOW ANALYSIS NOTES
◉ Departmental overhead rate method
Answer: Uses a different overhead rate and allocation base for each
production department
◉ Activity-based costing (ABC)
Answer: Focuses on activities to assign overhead to products in
proportion to the amount of activity required
◉ Activity cost pool
Answer: A collection of costs related to the same activity
◉ Unit-level activities
Answer: Performed on each individual product unit
◉ Batch-level activities
Answer: Performed on each batch or group of units
, ◉ Product-level activities
Answer: Performed on each product line
◉ Facility-level activities
Answer: Performed to sustain facility capacity as a whole
◉ Costs of quality
Answer: Costs resulting from manufacturing defective products or
not meeting customer expectations
◉ Plantwide overhead rate
Answer: Total budgeted overhead cost / Total budgeted allocation
base
◉ Departmental overhead rate
Answer: Total budgeted departmental overhead cost / Total amount
of departmental allocation base
◉ Cost pool activity rate
Answer: Overhead costs assigned to pool / Expected activity level
MANAGERS 6TH EDITION 2026 CAPITAL
BUDGETING INVESTMENT APPRAISAL AND
CASH FLOW ANALYSIS NOTES
◉ Departmental overhead rate method
Answer: Uses a different overhead rate and allocation base for each
production department
◉ Activity-based costing (ABC)
Answer: Focuses on activities to assign overhead to products in
proportion to the amount of activity required
◉ Activity cost pool
Answer: A collection of costs related to the same activity
◉ Unit-level activities
Answer: Performed on each individual product unit
◉ Batch-level activities
Answer: Performed on each batch or group of units
, ◉ Product-level activities
Answer: Performed on each product line
◉ Facility-level activities
Answer: Performed to sustain facility capacity as a whole
◉ Costs of quality
Answer: Costs resulting from manufacturing defective products or
not meeting customer expectations
◉ Plantwide overhead rate
Answer: Total budgeted overhead cost / Total budgeted allocation
base
◉ Departmental overhead rate
Answer: Total budgeted departmental overhead cost / Total amount
of departmental allocation base
◉ Cost pool activity rate
Answer: Overhead costs assigned to pool / Expected activity level
