Activity Based Costing helps business allocate costs with greater accuracy throughout the organisation, compared to the traditional standard or average costing methods.

As the name suggests, 'activities' are examined throughout the 'business value chain' and the cost of those activities are proportioned to each product, service or customer. Cost pools are identified, and for each pool the best 'activity driver' ( headcount, floor space, cycle count, process timing etc) is chosen to allocate the cost from that Cost Pool and assign it to a Cost Object.

This is completed through a consultative approach with key personnel. As a rule of thumb, the more diverse your product range and customer profiles are, the more likely ABC method of costing will return significant value to your business.

This method of costing assists management to make informed decisions on pricing, product mix, discount incentives, resource allocation and business strategy. Going through this process in itself helps any business understand their cost structure with more clarity.

We can help you achieve your 'Activity Based Costing' goals. This may be in data preparation, cost pool identification, cost driver identification, cost allocation, software support, dimensional report development.

Enjoy the benefits of this modern costing methodology!