Chapter 5
More Activity, More Cost: Activity-Based Costing
IN THIS CHAPTER
Understanding peanut butter costing
Identifying more details in product costs
Improving decision-making with activity-based costing
Using activity-based costing to increase profits in the budgeting process
Changing your business model through activity-based costing
As a business owner or manager, you can always use more information — information that helps you make informed decisions.
Chapter 4 introduces two widely used costing methods: job costing and process costing. Now dig deeper for better information on costs. Pull apart your product or service, and find out more about the activities that create cost. The result is an activity-based costing system.
Activity-based costing (ABC) is a methodology that focuses on activities. When compared to other costing methodologies, it assigns indirect costs (overhead) more accurately. Because ABC uses more detail, your cost estimates become more precise. As a result, ...
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