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As the definition, Activity Based Costing is an analytical technique is used as part of a business transformation effort to gain an understanding of the cost and revenue associated with a product or service to determine true profitability. Professional experts at Sample Assignment help to complete assignments within the prescribed time limit with pocket-friendly prices. These accounting experts are masters and PhD holders which will help to provide a wide range of diverse questions to help with best accounting assignment.
With an Activity-based costing assignment, students will learn about the concept that how products consume activities and how activities consume resources. This will help them in their prospective profession. In general, Activity-based costing is a two-phase product costing method that assigns costs first to activities and then to products based on the use of activities for each product. An activity is an isolated task that an association undertakes to make or deliver a product or service.
Activity-based costing involves the following five steps:
1. Identify the activities (similar to order processing) that consume resources and assign their costs to them.
2. Identify the cost drivers associated with every activity. A cost driver causes the costs of an activity. For the order processing activity, the cost driver can be the number of orders.
3. Calculate a cost rate (rate) per unit or cost-driving transaction. The cost-driving fee can be the cost per order.
4. Assign costs to products by multiplying the cost driving rate by the volume of cost-driving units consumed by the product.
5. Prepare the report.
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The advantages for companies that implement Activity-Based Costing are:
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