activity-based costing(redirected from Activity Based Costing)
Activity Based Budgeting
activity-based costinga 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.