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

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:

Activity Cost Pool Definition Activity Measures
1 Customer order

Assign all costs of resources that are consumed by taking and processing customer orders

Number of customer orders

2 Product Designs

Assign all costs of resources consumed by designing products

Number of product design

3 Order Size

Assign all costs of resources consumed as a consequence of the number of units product

Machine-hours

4 Customer Relations

Assign all costs associated with maintaining relations with customers

No of active customers

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