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Financial Terms | |
Activity-based costing (ABC) |
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Definition of Activity-based costing (ABC)Activity-based costing (ABC)A cost allocation system that compiles costs and assigns activity-based costing (ABC)a process using multiple cost drivers to predict and allocate costs to products and services; activity based costing (ABC)A relatively new method advocated for the
Related Terms:ABCsee activity-based costing ABC inventory classificationA method for dividing inventory into classifications, ABC TestA test used to determine the status of an employee under a state unemployment Absorption costingA method of costing in which all fixed and variable production costs are charged to products or services using an allocation base. absorption costinga cost accumulation and reporting ![]() Absorption costingA methodology under which all manufacturing costs are assigned activitya repetitive action performed in fulfillment of business functions activity analysisthe process of detailing the various repetitive actions that are performed in making a product or Activity-based budgetingA method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing. activity-based budgeting (ABB)planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and Activity-based costingA method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers. activity-based management (ABM)a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received activity centera segment of the production or service activity drivera measure of the demands on activities and, ![]() Allocation base A measure of activity or volume such as labourhours, machine hours or volume of production Asset activity ratiosRatios that measure how effectively the firm is managing its assets. Asset-based financingMethods of financing in which lenders and equity investors look principally to the Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. attribute-based costing (ABC II)an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute backflush costinga streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires business-value-added activityan activity that is necessary for the operation of the business but for which a customer would not want to pay direct costingsee variable costing Direct costingA costing methodology that only assigns direct labor and material costs Equity-based insuranceLife insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio. FIFO method (of process costing)the method of cost assignment that computes an average cost per equivalent First in, first-out costing method (FIFO)A process costing methodology that assigns the earliest full costingsee absorption costing hybrid costing systema costing system combining characteristics Job costingA method of accounting that accumulates the costs of a product/service that is produced either job order costing systema system of product costing used Kaizen costingThe process of continual cost reduction that occurs after a product life cycle costingthe accumulation of costs for activities that Lifecycle costingAn approach to costing that estimates and accumulates the costs of a product/service over modified FIFO method (of process costing)the method of cost assignment that uses FIFO to compute a cost per non-value-added (NVA) activityan activity that increases the time spent on a product or service but that does not increase its worth or value to the customer Priority-based budgetA budget that allocates funds in line with strategies. Process costingA method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced. Process costingA costing methodology that arrives at an individual product cost through the calculation of average costs for large quantities of identical products. process costing systema method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products; relevant costinga process that compares, to the extent possible strict FIFO method (of process costing)the method of cost assignment that uses FIFO to compute a cost per equivalent unit and, in transferring units from a department, keeps the Target costingA method of costing that is concerned with managing whole-of-life costs of a product/service during the product design phase – the difference between target price (to achieve market share) and the target profit margin. target costinga method of determining what the cost of a value-added (VA) activityan activity that increases the worth of the product or service to the customer Value-based managementA variety of approaches that emphasize increasing shareholder value as the primary goal of every business. Variable costingA method of costing in which only variable production costs are treated as product costs and in which all fixed (production and non-production) costs are treated as period costs. variable costinga cost accumulation and reporting method weighted average method (of process costing)the method of cost assignment that computes an average cost per Zero-based budgetingA method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |