Accounting › Section S · Activity-based, variable, and absorption costing › Topic S.2
Activity-based product costs
Activity-based costing (ABC) replaces one overhead rate with several, one for each major activity the factory performs. Products then carry overhead in proportion to the activities they actually consume, which often changes the picture of which products make money.
In this topic
- Why one rate can mislead
- Activities, cost pools and drivers
- The cost hierarchy
- The five steps
- Worked example: Halvorsen's activity rates
- Worked example: assigning the pools
- Reading the result
- Facility-level costs
- ABC in service organisations
- Common mistakes to avoid
- Key takeaways
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