Chapter 4

Using Activity-Based Costing

IN THIS CHAPTER

check Understanding traditional overhead allocation

check Seeing how ABC works

check Introducing a simple ABC system

check Working with ABC in QuickBooks

check Activating the Class Tracking feature

check Working with classes in ABC

Activity-based costing (ABC for short) may be the best new accounting idea in the past three decades. No, I must amend that: Activity-based costing is the best new idea in accounting in the past three decades.

ABC gives businesses a better way to estimate the profits of products and services, which is more important than you may think. The problem in many businesses is that overhead expenses or operating expenses don’t cleanly tie to products or services. Without good allocation of overhead or operating expenses, businesses can’t accurately determine which products make money and which don’t.

ABC addresses this problem by using the power ...

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