Understanding Activity Based Costing
Activities consume resources and resources have a cost. This is the foundation of activity based costing.An activity is work that gets done in an organization. It is a combination of men, materials,machines, technology and process that leads to a desired result.These processes require resources. Resource could be people- so direct labour could be involved. Labour cost has a direct relationship with benefits. So benefits is also considered as a part of the direct cost.
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