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Activity based costing (ABC) | Free template

Activity based costing is a free template that step by step shows the process to establish an activity-based cost calculation. Activity based costing is a cost accounting method that assumes that activities consume resources and that objects are using activities.

In activity based costing the focus is on activities and costs that have been categorized are allocated to activities using resource drivers. Resource drivers is allocation keys showing the causes of costs and are used to allocate costs to activities, cost is allocated depending on how much of the resource driver is used in the activity. The allocation of costs from activities to object are done by using cost drivers. Cost drivers are allocation keys showing how the resources are consumed in activities and are used to allocate activity costs to the objects depending how much of the cost driver a product consumes.

An ABC-calculation is drawn up in four steps and this template displays calculations in each step down to the last step when the costs ultimately are allocated to the object. Activity based costing can be used both as preliminary calculation and as a control calculation after the production is finished. Activity based costing can form a basis for pricing decisions, inventory valuation or profitability analysis and more.

In activity based costing the volume of cost drivers is based on the practical available capacity. The practical capacity available for a task is the theoretically available capacity adjusted by an adjustment factor of 80-85% for breaks, communication, stop, fault and maintenance. The theoretically available capacity is the volume used in the activity when it is full occupancy. As the cost driver volume is based on the practical available capacity it is possible to calculate the capacity utilization in an activity and thus assess whether the capacity should decrease or increase in certain activities due to low utilization or bottlenecks.

You can use this template to establish an ABC-calculus for activities and objects. Objects in activity based costing can be a production order or a product.
Updated: 01/01/2015 | Created by

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Tags: products decision making cost calculations excel spreadsheet