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Cost Accounting For Dummies by Kenneth Boyd

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Chapter 5

More Activity, More Cost: Activity-Based Costing

In This Chapter

arrow Understanding peanut butter costing

arrow Identifying more details in product costs

arrow Learning how to implement an activity-based costing system

arrow Improving decision-making with activity-based costing

arrow Using activity-based costing to increase profits in the budgeting process

As a business owner or manager, you can always use more useful information — information that helps you make informed decisions.

Chapter 4 introduces two widely used costing methods: job costing and process costing. Now dig deeper for better information on costs. Pull apart your product or service, and find out more about the activities that create cost. The result is an activity-based costing system.

Activity-based costing (ABC) is a methodology that focuses on activities. When compared to other costing methodologies, it assigns indirect costs (overhead) more accurately. Because ABC uses more detail, your cost estimates become more precise. As a ...

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