Activity-Based Costing 2018-05-24T09:45:53+00:00

ACTIVITY-BASED COSTING

EXPLANATION

Activity-Based Costing (ABC) is accounting methodology which came into existence to track the true cost of an item or service by recognising both the direct and indirect costs needed to produce the item or service. Originally intended for the manufacturing sector, ABC has grown into a methodology also used by services companies to expand their cost accounting capabilities. ABC helps you recognise the relationship between costs, activities and products, and through this relationship, assigns indirect costs to products far less arbitrarily than traditional methods. Magic Orange can be modelled to assign direct and overhead costs to products or customers for an unlimited number of activities and using the most appropriate drivers.