Respuesta :
A product’s cost is the sum of its direct-material cost, its direct-labor cost, and its overhead cost, compute product costs under an activity based costing system is the accumulation of all the resource costs driven to the product by the various cost drivers selected for the ABC system.
What is referred to as costing system?
- The costing system is designed to track the costs incurred by the business. The system consists of a set of forms, processes, controls, and reports designed to aggregate and report revenue, costs, and profitability to management. Reportable areas can be any part of the company, including its customers, departments, facilities, processes, products and services, research and development, and sales regions.
How to use the calculation system
The information produced by the costing system is used by management for various purposes, including:
- Fine-tuning operations to achieve higher profitability
- Deciding where to cut costs in the event of a business downturn
- Comparison of actual costs incurred with budgeted cost levels for control purposes
- Creating strategic and tactical plans for future operations
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