Cause-and-Effect Allocations

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Definitions
Activity-Based Costing (ABC)
Activity-Based Costing Cost Allocation Management Accounting Cost Drivers Cost Pools Traditional Costing Systems Cause-and-Effect Allocations Absorption Costing
Activity-Based Costing (ABC) is an accounting method of cost allocation that assigns costs to products and services based on the activities and resources that they consume.
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Definitions
Arbitrary Allocation
Arbitrary Allocation Cost Allocation Allocation Base Activity-Based Costing Cause-and-Effect Allocations
An arbitrary allocation refers to a cost allocation process that uses an allocation base unlikely to yield accurate costs. Examples include using the number of students to allocate the cost of a lecture, irrespective of the class size.
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