Users' questions

Which of the following is the objective of Activity-Based Costing?

Which of the following is the objective of Activity-Based Costing?

ABC aims at rectifying the inaccurate cost information. It is modern approach of indirect cost allocation. ABC does not confined itself to the allocation to indirect costs to departments as it is done in the conventional costing but it identifies individual activity as the lowest unit for indirect cost allocation.

Who uses Activity-Based Costing what type of businesses do Activity-Based Costing?

Manufacturing industries tend to use activity-based costing since overhead costs are a large portion of overall production cost.

When should Activity-Based Costing be used quizlet?

Any factor or activity that has a direct cause-effect relationship with the resources consumed. In ABC, cost drivers are used to assign activity cost pools to products or services. Activities required to support or sustain an entire production process.

What is the main objective of Activity-Based Costing Mcq?

This accounting method of costing recognizes the relationship between costs, overhead activities, and manufactured products, assigning indirect costs to products less arbitrarily than traditional costing methods.

What is activity based?

Activity base. An activity base is a measured activity that is used to allocate overhead costs. For example, the number of machine hours used during a reporting period is a reasonable activity to use as the basis for allocating machine costs to units produced.

What is activity based pricing?

Activity-based costing (ABC) is a costing method that assigns overhead and indirect costs to related products and services. This accounting method of costing recognizes the relationship between costs, overhead activities, and manufactured products, assigning indirect costs to products less arbitrarily than traditional costing methods.

What is activity based approach?

An activity based approach refines a costing system by focusing on individual activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services.

What is activity rate in accounting?

An activity is a cost driver, such as purchase orders or machine setups. The cost driver rate, which is the cost pool total divided by cost driver, is used to calculate the amount of overhead and indirect costs related to a particular activity.