Activity Based Costing
Activity-Based Costing (ABC) is a technique of assigning the organization's resource costs on the basis of activities to the products and services provided to its customers.
It can be defined as a technique of cost appropriation to the cost units on the basis of benefits received from indirect activities. It is used for apportionment of overheads costs in an organization having products that differ in volume and complexity of production.
Under Activity-Based Costing (ABC) technique, the overhead costs of the organization are identified with each activity which is acting as a cost driver i.e. the cause for incurrence of overhead cost. The overhead costs can be assigned to the jobs or products on the basis of number of activities consumed for their completion.
ABC principles are used:
• To bring management attention on the total cost to produce a product or service,
• As the basis for full cost recovery ABC Costing: Support services are particularly suitable for activity based resourcing because they produce identifiable and measurable units of output
These online MCQ Mock tests and MCQ questions includes all main concepts of the chapter (Activity Based Costing) in CS Executive Module I Cost and Management Accounting (MCQ based OMR) Exam.