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What is Activity Based Costing Explained about?

Traditional absorption costing allocates overheads based on a single cost driver like machine hours. Activity based costing (ABC) assigns overheads to products based on their usage of different activities that drive overhead costs, using multiple cost drivers. ABC involves identifying activities, their cost drivers and cost pools, then allocating pool costs to products based on driver usage. It provides more reliable product costs and facilitates pricing decisions. While more complex, ABC recognizes not all

Author

Musthari Khan

Language

EN