Activity Based Costing

                                                                                                                                        

MBA

Accounting for Managers

ASSIGNMENT

 

Course Code: MMPC-004

Assignment Code: MMPC-004/TMA/JULY/2022 

Coverage : All Blocks

(b) Activity Based Costing

Activity-based costing (ABC) is a cost accounting method that assigns indirect costs to products or services based on the activities required to produce them. This approach recognizes that not all costs are directly related to the volume of output or production, and therefore, a more precise allocation of overhead costs is needed to determine the true cost of a product or service. 

ABC involves identifying the activities that are required to produce a product or service and assigning costs to those activities. The cost of each activity is then allocated to the products or services that consume the activity in proportion to the amount of activity consumed.

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