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ABC system for Cost-Allocation

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Give four examples of activities and related cost-allocation bases that can be used in an ABC system to allocate costs to products, services, or customers.

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Solution Summary

Activity Based Costing (ABC) is a modern accounting system which segregates expenses (overheads) based on specific functions and then allocated the cost among individual items based on volume of activity. Under this system the cost of all activities and overhead are traced to a particular product or service rather than spread across all product lines or services. This enables resources and overhead costs to be more accurately assigned to the product and the services that consume them.
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Activity Based Costing (ABC) is a modern accounting system which segregates expenses (overheads) based on specific functions and then allocated the cost among individual items based on volume of activity. Under this system the cost of all activities and overhead are traced to a particular product or service rather than spread across all ...

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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