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Unformatted text preview: Activity based costing: (ABC) is a costing model that identifies various activities in an organization and assigns the cost of each activity resource to all products and services in line with the actual consumption of each activity. In this way an organization can precisely estimate the cost of its individual products and services for the purposes of identifying and eliminating those which are unprofitable. In a business organization, the ABC methodology assigns an organization's resource costs through activities to the products and services provided to its customers. It is generally used as a tool for understanding product and customer cost and profitability. As such, ABC has predominantly been used to support strategic decisions such as pricing, outsourcing and identification and measurement of process improvement initiatives. ABC helps to identify inefficient department & activity, allocate more resources on profitable product, control the cost at individual level, and find unnecessary costs. However, with ABC, overhead costs are control the cost at individual level, and find unnecessary costs....
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This note was uploaded on 11/04/2011 for the course ECON 112 taught by Professor Mike during the Spring '11 term at Université de Liège.
- Spring '11