Activity Based Costing


J

Jim

Does anybody know if it is possible to apply ABC principles to the food service industry where the product is perishable?
 
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K

Ken Russell

It would certainly give you a good indication of the full cost of each
product irrespective of whether it is perishable or not. Just because all
the costs are expensed in the case of perishable food does not bar them from
being allocated to products based on activity.
 
J

Jim

Thanks for the reply.

Jim
It would certainly give you a good indication of the full cost of each
product irrespective of whether it is perishable or not. Just because all
the costs are expensed in the case of perishable food does not bar them from
being allocated to products based on activity.
 
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Activity-based costing (ABC) allocates expenses based on the activities performed by each of the departments or functional units of a business. Rather than adding all costs incurred in a single department or function, ABC breaks departmental workflows down into component tasks. Activity-based costing considers cost drivers, such as the time is taken and space required for each task, customers served, etc., to determine the cost of different activities.
 

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