charged indiscriminately to all products without regard to possible differences in resources used in the manufacture of one product versus another; and (6) the functional costs of marketing, financing, and administration are accumulated in cost pools and are treated as costs of the period in which they are incurred. These costs are not treated as product costs nor are they typically related to products when determining the profitability of one product as compared to another.
Activity-based costing was developed as a response to the changing information needs of the contemporary manufacturing environment. The ABC system is a more refined way of determining product cost, and the ABC system can serve as a means of obtaining a total process view of all costs related to providing a product or service. ABC can refine the way product costs are determined because of the increased technology that enables an organizati
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