activity-based costing

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Activity Based Budgeting

A way to budget that analyzes potential activities in which a company can engage. These activities are organized according to the company's goals, and the costs of each are organized to compile the budget. ABB contrasts with traditional budgeting, which usually simply increases the previous year's budget to account for inflation and the like; rather, ABB seeks out new opportunities and allocates resources in the budget based on them. Proponents say that ABB is a more accurate way to forecast budgeting.
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activity-based costing

a system of product costing which seeks to break down the divide between FIXED COSTS and VARIABLE COSTS by looking at the total cost to the business of making a product. All costs are related to cost drivers - the factors which influence the cost of a product.

Activity costing is suggested as an alternative to STANDARD COSTING, which analyses labour costs in detail and tends to share out overheads between products by reference to the direct labour hours involved in making different products. However, in automated factories, where labour is a relatively unimportant part of the total product cost, such detailed analysis of labour may not be justified and direct labour costs may be an inappropriate basis for analysing overheads. For such automated plants activity costing may be preferable, focusing as it does on the forces driving the costs of being in business.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
References in periodicals archive ?
Teaching note: Traditional and activity based costing systems.
Time-Driven activity based costing: A dynamic value assessment model in pediatric appendicitis.
Bazrafshan S, Karamshahi B (2017) Examining the disadvantages of activity based costing (ABC) system and introducing the modern (behavior based costing) (BBC) system.
Since the 1980s, in order to obtain accurate cost information to be used in different management decisions for different purposes, new management and cost accounting methods have been developed such as activity based costing, target costing, product life cycle costing, quality costs, just in time costing.
Time-Driven activity based costing: Theory, applications and limitations.
Activity based costing. The Management Accountant, 31 (7), 520-524.
In order to arrive at the exact causes for these non-uniformity, a activity based costing model is developed.
(2007), Technological innovations, activity based costing and satisfaction, Journal of Accounting-Business and Management, No.
The Activity Based Costing (ABC) is a method of analyzing business operations that leads to cost identification and cost classifications based on activities.

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