Activity based costing homework help

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Activity based costing (ABC)

In marketing of a product the sales cost is developed for a product by using the product cost data. The product cost data may include of the manufacturing cost plus the profit required. By activity based costing these types of functions can be understood and hence overhead costs can be assigned to the products. Also fondly named as ABC, Activity based costing is an important technique to know the various situation a product goes through before finishing and all the costs associated to it. In our Activity based costing homework help article we provide the various aspects of ABC to help the students regarding its fundamentals.

Stages and flow of cost in Activity Based Costing

In order to understand the flow of cost, first a student need to ensure that tey gather enough knowledge about two primary stages in ABC. In our Activity based costing homework help article we define them as

• Tracing cost to activities.
• Tracing activities to product.

The various steps explained below are adopted in both the stages.

1. Identification of major activities in the company: Right from the starting of procurement of material to machining it and transporting it, many activities are performed over the material. All these activity bear certain cost and these cost are identified in the first stage.

2. Factor identification determining the cost of an activity: They are called as cost drivers. The number of purchase orders or the number of orders delivered in a specified span of time can be the cost drivers.

3. Collection of cost pool which also represents the cost of each activity and are directly equivalent to conventional cost centres.
4. Support overheads are charged based on the activity of the product’s usage. If it is frequent the support overheads allotted should be more and vice versa. For example if the final cost of purchase is Rs. 2,00,000 and there are 1,000 orders purchased and hence the amount of per purchase unit order is Rs. 200. A batch having 3 purchase orders should be charged at Rs. 3X200 i:eRs. 600 as support overhead costs.

Components of Activity Based Costing

Our Activity based costing homework help team experts are working professionals in the market and hence know the Activity based costing technique in a nice manner. They suggest that the following 5 components of the ABC is worth knowing.

1. Resources: The main source of a company expenses are resources. The amount spent by the company to enhance the activities are called as resources. Salaries and material are the two main resources that are used to enhance the activity.

2. Resource drivers: the hints to trace the resources and link them with activities are called resource drivers. This can be determined by the quantity if resource consumed by the activity.

3. Activities: a unit of work is called an activity. Each activity consumes time and resources and hence money too. The following example from our Activity based costing homework help is an illustration of various activities performed by a waiter when we go out for dinner

a. The waiter receives the customer and tells the menu
b. Waiter takes the order
c. Transfers the required order to the chef in kitchen
d. Brings food
e. Provide beverages like water
f. Brings the bill
g. Takes money and provides the remains
h. Clear the table for next customer.

4. Activity cost drivers: activity cost is traced and linked to activity objects by activity cost drivers. When cost objects place a frequent demand on the activity, cost drivers measure them.

5. Cost objects: the final product used by the customer and its service provided to customer is brought in the category of cost objects.

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