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The Activity Based Costing (ABC) approach relates indirect cost to the activities that drive them to be incurred. Activity Based Costing is based on the belief that activities cause costs and therefore a link should be established between activities and product. The cost drivers thus are the link between the activities and the cost of the product.
The cost driver is a factor that creates or drives the cost of the activity. For example, the cost of the activity of bank tellers can be ascribed to each product by measuring how long each product's transactions (cost driver) take at the counter and then by measuring the number of each type of transaction.
While (ABC) Activity-based costing may be able to pinpoint the cost of each activity and resources into the ultimate product, the process could be tedious, costly and subject to errors. As it is a tool for a more accurate way of allocating fixed costs into a product, these fixed costs do not vary according to each month's production volume.
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This is related to an activity rate which is a similar calculation used in Activity-based costing. A pre-determined overhead rate is normally the term when using a single, plant-wide base to calculate and apply overhead. Overhead is then applied by multiplying the pre-determined overhead rate by the actual driver units. Any difference between ...
Job costing (known by some as job order costing) is fundamental to managerial accounting. It differs from Process costing in that the flow of costs is tracked by job or batch instead of by process. job cost is done for one single product The distinction between job costing and process costing hinges on the nature of the product and, therefore, on the type of production process:
As an example, they really don't want to see men playing in women's sports. You can have a—and this is one: They don't want to see, as another example, open borders. They want to see people come in.
Cost pools is an accounting term that refers to groups of accounts serving to express the cost of goods and service allocatable within a business or manufacturing organization. [1] The principle behind the pool is to correlate direct and indirect costs with a specified cost driver, so to find out the total sum of expenses related to the ...