It is known as Activity Based Costing System.
- ABC is a technique for allocating overhead and indirect costs, such wages and utilities, to goods and services.
- The ABC method of cost accounting is built on activities, which are defined as any occasion, project, or job with a clear objective.
What, using an example, is activity-based costing?
- Examples include the amount of space required per product, which is used to divide the rent for the factory and the company's maintenance costs, and
- the quantity of purchase orders (i.e., PO) used to divide the purchasing costs of the purchasing department.
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