The process by which activity rates are used to apply costs to products and customers in activity-based costing.
Second-stage allocation
A “bucket” in which costs are accumulated that relate to a single activity measure in an activity-based costing system.
Activity cost pool
An event that causes the consumption of overhead resources in an organization.
Activity
Activities that are carried out to support customers, but that are not related to any specific product.
Customer-level activity
A costing method based on activities that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore fixed as well as variable costs.
Activity-based costing (ABC)
The process by which overhead costs are assigned to activity cost pools in an activity-based costing system.
First-stage allocation
Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in the batch. The amount of resource consumed depends on the # of batches run rather than on the # of units in the batch.
Batch-level activity
An allocation base in an activity-based costing system; ideally, a measure of the amount of activity that drives the costs in an activity cost pool.
Activity measure
Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.
Product-level activities
A simple count of the number of times an activity occurs.
Transaction driver
Activities that are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made.
Organization-sustaining activities
A systematic approach to identifying the activities with the greatest potential for improvement.
Benchmarking
Activities that are performed each time a unit is produced.
Unit-level activities
A measure of the amount of time required to perform an activity.
Duration driver