Management Finance Essay Example | Topics and Well Written Essays - 2250 words

Management Finance - Essay Example In the following parts of this paper, first features of ABC have been provided in which entire ABC process has been included. Subsequently, comparison relating to selling price and selling volume with absorption costing has been included. After this step, budgeting and planning, budgeting and control, budgeting and performance evaluation and budgeting and motivation parts have been given before the conclusion. Activity-Based Costing (ABC) refers to as â€Å"It is a technique which involves identification of cost with each cost-driving activity and making it the basis for apportionment/assignment of costs over different cost objects/jobs/products/customers/services† (Pandikumar, 2009, p. 414). The analysis of this definition further highlights that ABC is mainly based on three fundamental activities: cost identification, activities and apportionment basis. Fundamentally, ABC is based on a sequence of activities in which costing process is carried out. In the first step, the process of identifying the activities is carried out in which organizational activities are properly pointed out; in the second step, computation of the cost of each activity is conducted; in the last step, the process of identifying the activity cost driver takes place which concludes the entire sequence of ABC (Ryan, 2014). And the typical examples of cost activities are schedule production jobs, machine set up costs, number of orders and number of batches (Ryan, 2014). In addition, cost pool and cost activities are two different activities. In the cost pool, total attached costs are combined and the combined costs are further allocated to cost activities. However, before allocating costs to cost activities, identification of drivers is of paramount importance. In the Berry Ltd, the company has budgeted machine set up costs $280,000, material ordering costs ($316,000), machine running