Flashcards in Costing Definitions Deck (4):
A technique that focuses on variable costs and contribution to fixed costs and profits.
It is primarily used for short term decision making. (One off orders).
Focuses on overheads and full cost recovery through the apportionment of overheads to production cost centres on some equitable basis, and the calculation of OAR for cost units.
Activity Based Costing (ABC)
A development of absorption costing and focuses on overheads and full cost recovery.
Arguably more accurate as it focuses on cost drivers and avoids splitting overheads between cost centres.