Question

Please, find an example of Activity Based Accounting and write a brief memo (no more than 2 pages) about the example.

Use a memo template from Word to create your document.

Answer 1

Activity based Costing

Activity based costing is the allocation of cost to activities rather than products and services.

Activity means the event than incurs that cost to the company.

For eg :

A) For a Customer service activity cost can be allocated based on  :

1) Number of Product serviced.

2) Number customer service call made.

3) Number of hours spend on servicing products.

B) For marketing activities cost can be allocated based on :

1) Cost of each advertisement made.

2) Number sales personal and there salary.

3) Cost for making each sales.

C) For Distribution activities cost can be allocated based on :

1) Number of customers.

2) Number of units distributed.