Accounting Problems: USAA

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Activity-Based Costing (ABC) is an accounting technique that allows an organization to determine the actual cost associated with each product and service produced by the organization without regard to the organizational structure. Activity- based costing can be used to identify discrete activities as well as identifying the primary output measure for each activity. With using activity-based costing there are value added-activities and non- value added-activities. Value added-activities are activities which customers are willing to pay for or show that after the process there will be a profit. Non- value activities are activities which customers are not willing to pay for or activities which do not show future profit. The activities must be analyzed in order to decide what will be a productive measure. When using activity-based costing an organization can measure costs against individual activities. With seeing what the results are, the company can figure out if there can be an adjustment made to create a value added-activity. If the activity turns out to be a non-value added-activity the organization may decide to delete the activity all together.
Activity-Based Costing is a more accurate cost management methodology. ABC will allow us to focus on indirect costs, including our overhead. We can trace our expense category to a particular cost object rather than to allocate it. Using this process will also help us make indirect expenses direct. Activity-Based Costing is a costing model that identifies the cost pools, or activity centers, in an organization and assigns costs to products and services (cost drivers) based on the number of events or ...