Activity Based Costing

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hello<BR><BR>I'm having a little trouble grasping Activity Based Costing. Has anyone got any ideas on the approach to ABC???<BR><BR>Thanks<BR><BR>Archersgirl<BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Activity Based Costing

    Just read it again and again in the book and you should take it in. Everyone has difficulty in getting it first time. If you are stuck on anything in perticular then post your details on here and someone should be able to help.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Activity Based Costing

    Thanks<BR><BR>Archersgirl
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Activity Based Costing

    <BR>ABC is the 'sensible' way of costing.<BR><BR>If a factory spends 6 hours a day making 5,000 units of product A then the remaining 1 hour of the day making 5,000 units of product B then obviously it would not be fair to apportion the costs half and half.<BR><BR>ABC takes all the processes involved in making a product and gives each process a cost per unit. Then if one product uses 45 stores requistions and another only uses 5, the overheads from stores will be apportioned appropriately.<BR><BR>Hope that makes sense - it's been a little while since I covered it!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Activity Based Costing

    What happens if it cost more to produce the "B" products than the "A" products.........<BR><BR>just food for thought!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Activity Based Costing

    Try to keep in mind that ABC is 'son of absorption costing'. You take a fixed cost or a group of such costs (cost pool), consider what causes the cost (cost driver) and then work out a cost per driver. It works in an almost identical fashion to the calculation of a cost per machine hour that you used at Intermediate.

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