Activity-based Costing: What it is and how it Works Introduction and Thesis Activity-based costing is a method used by manufacturing and service firms to accurately cost a product or a project to charge a price or a fee that: (1) covers the internal costs associated with manufacturing the product or providing the service and (2) allows for a profit margin that is competitive. Activity-based costing allows firms to set accurate prices, eliminate or restructure unprofitable activities and increase efficiencies by finding ways to reduce overhead on high overhead activities. Traditionally, the cost of labor and direct and indirect overhead were the driving forces used to set a price or fee sufficient to cover costs and allow for some profit....The end:
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