ACTIVITY BASED COST

MANAGEMENT
 MEANING OF ABC
Activity base costing is an accounting methodology
that assign costs to activity rather than products or
services

This enables resources and overhead costs to be

more accurately assigned to products and services that
consume them
CHARETERIZED
IT CHARETERIZED IN FOUR CORE AREA THAT
IS…………

I. Cost object

II. Cost drivers

III. Resources cost drivers

IV. Activity cost drivers

 STAGES IN ABC
THERE ARE FIVE STAGES IN ABC THAT IS………….

1) Identification of the activity that may take place in an organization

2) Assigning costs to cost pool for each activity

3) Support activities are then spread across the primary activities

4) determine the cost drivers for each activity

5) Assigning the cost of activities to product according to product

demand for activities
 COST FLOW IN ACTIVITY BASED COSTING

a) Unit level activities

b) Batch level activities

c) Product level activities

d) Facility level activities

PURPOSES AND BENEFITS OF ABC
 Production overheads are high in relation to direct costs

 There is great diversity in the product range

 Products use very different amounts of the overhead

resources

 consumption of overhead resources is not primarily driven by

FECTORS THAT PROMOTING THE
DEVELOOMENT OF ABC
Growing overhead cost because of increasing
automated production

Increasing market competition which necessitated

more accurate product costs

Increasing product diversity to secure economies of

scope and increased market share
PRESENTED BY

MARGESH K.DESAI

MBA 2 YEAR
nd

ROLL NO-32