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Unlike other traditional costing systems, one of the importance of activity based costing is to determine the “true” cost for a cost object which is a product, service or customer

Why is then the  necessity to know the “true” cost of a product?

Some of the reasons includes the following:

To identify money makers/money losers;
To finding [...]

Some managers or readers who are assigned to build up an activity based costing system might be at a loss on how to even embark on this assignment.To do it, please look at the earlier articles on steps, conditions, factors,etc are provided.

In this article, the overview approach is given to implement the activity based costing [...]

As managers, we always try to relate the overheads costs by APPORTIONING to the various cost centres.

Remember that activity based costing is basically a ” one-step attribution system” as costs are NOT APPORTIONED between activities-the costs of each activity are RELATED DIRECTLY to products. Cost attribution is the process of relating cost to cost centres [...]

In an Activity-based costing system(ABC), the term allocation base is replaced by the term activity measure, and the term cost driver is also used.

The two types of activity measures are :

• Transaction driver – a simple count of the number of times that an activity occurs.   This is the least accurate type of activity measure.

• Duration driver – measures the amount of time needed to perform an
  activity. This is more accurate than a transaction driver, but it takes more effort to record.

The following are the examples of activity cost pools and corresponding activity measures:

Continue reading Types of Activity Measures & Activity Cost Pool And Corresponding Activity Measures