ABC can identify high overhead costs per unit and find ways to reduce the costs, avoid decreases in head counts due to inaccurate allocation of costs, and measure profitability with higher accuracy than traditional costing that uses direct-labor hours as the only cost driver (Activity-based costing, n.d.). Bibliography Activity-based costing (ABC). (n.d.). Retrieved Apr 2, 2009, from Managers-Net: http://www.managers-net.com/activityBC.html Activity-based costing (ABC): What is it and how can reengineering teams use it?

Activity-based Costing is a potent tool for an organization and assists in obtaining accurate and efficacious cost for precluding cost misrepresentation that may give rise to sustainable development and growth. Activity-based costing (ABC) was established and has been promoted as an approach of overcoming the systematic falsifications of traditional cost accounting and bringing significance back to managerial accounting. In particular, a traditional costing system reports the amount of money that

Activity-Based Costing in a Service-Based Organization Activity-Based Costing operates on the conventional approach and applies a two-stage allocation instruction and other cost drivers. First, the system identifies the important activities and overhead costs assigned to each activity in proportion to the resources used. Consequently, for each of these cost pools, cost drivers are identified. Secondly, the assumed overhead cost driver is assigned proportionally to the final outputs of the cost

Activity-based costing (ABC) employs numerous cost groups, organized by activity, in the allocation of overhead costs. The conception is that activities are necessitated to generate products, basically activities, such as procuring materials, setting up machinery, assembling products, and scrutinizing finished products. It is imperative to note that these activities can be expenses and therefore the cost of activities ought to be apportioned to products on the basis of how the

(Questions that will assist in quantifying the relationship between resources and activities include: How much time is spent performing each activity? What equipment is used to perform activities? Do some activities have dedicated equipment? Do some activities require more space than others?) After the data on resources have been collected, establish cause-and-effect relationships between resources and activities or resources and cost objects. The third step in the process is

General & Administrative-costs cannot reasonably be associated with any particular product or service produced (overhead). These costs would remain the same no matter what output the activity produced. An example would be salaries of personnel in purchasing department, depreciation on equipment, and plant security. In the next step the results of analyzing activities and the gathered organizational inputs and costs are brought together, which produces the total input cost for