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Activity Based Cosing is often assumed to be complex

Activity Based Cosing is often assumed to be complex -...

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Activity Based Cosing is often assumed to be complex, and consequently may seem rather impenetrable. This is something of a misconception, though. Although the various allocations of cost can be hard to unravel this is usually handled by software tools, while the methodology itself actually stems from a few basic principles, which are really just common sense. Principle 1: Activities consume resources . The more an activity is performed, the more resources will be consumed by it. Principle 2: Activities have a cause . All activities are performed for a reason or cause. In the most efficient organizations, activities are mainly attributable to external objects – customers, products or distribution channels. Usually, though, some activities will have an internal cause. For instance, internal support activities, such as those carried out in Personnel or IT functions, are generally caused by demand from other departments.
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