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Flashcards in Activity Based Costing (ABC) Deck (4):

Cost Rate Formula

Cost Pool / Cost Driver


Cost Pool

Costs decided up into groups after the firms analysis.


Cost Drivers

The factors that cause costs to change.


Benefits of ABC

Focus on what drives costs so it assigns a greater proportion of overhead to the cost units that create the greater proportion of overhead.
Generates a more accurate full cost figure.
Allows managers to be more effective in reducing costs as it’s clear what creates and drives costs up.