Activity-Based Costing, ABC
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What are some applications of ABC? How would this method influence a company's business process? Consider its impact on e-commerce, service, retail, and manufacturing. What are the potential dowsides of ABC?
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This posting looks at several issues that revolve around Activity-Based Costing.
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ABC method was developed when there was a tremendous change in manufacturing and service industries:
- A decrease in amount of direct labour usage.
- Significant increase in total overhead costs.
- May be inappropriate to use plant-wide predetermined overhead rates based on direct labour or machine hours when a lack of correlation exists.
Complex manufacturing processes may require multiple allocation bases; this approach is called Activity-Based Costing (ABC).
It is defined as an overhead cost allocation system that allocates overhead to multiple activity cost pools
and, Assigns the activity cost pools to products or ...
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