Activity-Based Costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.
Cost absorption involves assigning all costs, both fixed and variable, to the product or service being produced or delivered.
A cost sheet is a form used in costing to collect and present all the costs associated with a service, product, process, or cost center, often for management analysis or use in a costing system.
Labor and materials that can be identified physically in the product produced. Direct costs for an apartment building, for example, are construction materials and labor; indirect costs include architect's fees, interest during construction, insurance, and builder's overhead and profit allowance.
Direct labor refers to the cost of personnel that can be directly identified in the production of a product, such as the salary of workers operating machines on a production line but not including administrative or janitorial staff.
An essential component in a standard costing system, the standard cost card provides a detailed record of how the standard cost of a product is built up, encompassing materials, labor, and overheads.
Traditional costing systems are methods used to allocate indirect costs (overheads) to products, but they may not offer accurate product cost information due to their arbitrary allocation methods. These systems have strengths such as simplicity and cost-efficiency, but weaknesses include lack of precision in contemporary multiproduct environments.
In cost accounting, the situation where an insufficient amount of factory overhead was charged to the products manufactured.
