Activity Based Costing

Activity rates (driver rates) in ABC should be calculated based on the budgeted activity of the period

Activity Based Costing can be used in service industries

Cost drivers are factors that cause an activity to incur costs

Activity based costing is of limited benefit if overheads are only a small part of a company's costs

Activity based costing is a simpler system than traditional costing

Activity Based Costing is easier to explain than overhead absorption costing

Activity Based Costing allows a company to work out a more accurate cost per unit

Activity-based costing is most effective in companies that manufacture only one product