Activity Based Costing Model Map
This map is the central hub of ABC Focus activity based costing software with the main options. The buttons with green borders are for data input and those with yellow borders indicate results. The “map” lays out the steps necessary to complete an activity based costing model.
The cost objects are the sources of Revenue. In order to produce these Revenue outcomes costs, known as Cost lines, are incurred which need to be distributed between all the relevant activities. Some of this allocation occurs via pooled activities or cost pools
To build a model first the data like Revenue and the cost lines i.e. data for employees, materials and expenses are entered. Revenue is allocated directly to the cost object but cost lines usually follow a lengthier route via cost pools determined by cost drivers. The end result includes the cost of individual products and services and those that amalgamate into composite objects. Activity based costing assures that the overheads necessary to provide the income are distributed among the products and services from which the income is generated. The price of the item accurately reflects all the costs involved. The concepts of ABC are explained here