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.

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.

References in periodicals archive ?
7), Kaplan and Anderson pointed out the major implementing problems of the Conventional Activity-based Costing (CABC) as follows:
Activity-based costing (ABC) has been slowly gaining traction among hospital financial managers, yet has not been widely adopted as a method to improve the value cycle.
The possible way of the simplification of the system is the application of time-driven activity-based costing system (TDABC).
ACTION POINT: Activity-based costing is a totally different way of thinking, especially for accountants whose financial reports do not require activity costs.
Time-Driven Activity-Based Costing is an innovative model available to organizations interested in having a clearer grasp of the costs and profits involved in delivering products and services to their clients.
This case involves designing and analyzing an activity-based costing system for a laboratory.
For those programs and services that the agency knows it must provide and produce, activity-based costing and business process reengineering are used to move forward.
Furthermore, it claims to offer a superior offering to those currently underway at ERP companies because its applications suite is agnostic to the ERP backbone - Lawson, PeopleSoft, SAP and Oracle have tried to integrate the activity-based costing modules with each respective back-end platform.
Since batch-level costs are one of the most significant levels within the activity-based costing hierarchy, cost designers must consider further refining assumptions inherent in the application of batch costs to cost objects.
With activity-based costing, you get a management tool that gives you the cost and profitability information you need to truly understand your businessand with that kind of information, you get the results you need to be competitive in today's tough global market.
Activity-based costing provides the most accurate response.
From roots at Tektronix and PSU, activity-based costing penetrates manufacturing around the world, and now services and government, too.

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