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 |
- What is Activity-Based Costing System?
- Activity-Based Costing System:The Necessity To Know The “True” Cost Of A Product
- Steps In Implementing Activity-Based Costing System(ABC):
- Short Term Decision Making:Other Relevant Cost Techniques(Part2)
- Activity Based System Question No 4 (with answer)
- Limitations of Activity-Based Costing (ABC) System
- Checklist On Types Of Waste Activities In An Organization

FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four,Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.Also author to another very popular free educational accounting cum finance blog:http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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