Activity Based Costing

Activity Based Costing (ABC)
This is an attempt to absorb overhead into product costs. In principle there is no significant difference between ABC and traditional absorption costing. In absorption costing, production overheads are divided between products on the basis of production time for each one rather than activities that take place during production. This allocation is, as already described, arbitrary and is not a reflection of costs incurred and can result in incorrect pricing of products.
Activity Based Costing (ABC) is an accounting technique that allows an organisation to determine the actual cost associated with each product produced without regard to the organisational structure
In order to achieve the major goals of business process improvement, process simplification and improvement, St Ives managers need to fully understand the cost, time, and quality of activities performed by employees or machines throughout an entire organisation. ABC methods will enable managers ...