| activity-based costing (ABC) system | A two-stage procedure used to assign overhead costs to products or services produced. In the first stage, significant activities are identified, and overhead costs are assigned to activity cost pools in accordance with the way resources are consumed by the activities. In the second stage, the overhead costs are allocated from each activity cost pool to each product line in proportion to the amount of the cost driver consumed by the product line.
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| activity cost pool | A grouping of overhead costs assigned to various similar activities identified in an activity-based costing system.
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| activity dictionary | A complete listing of the activities included in an organization's ABC analysis.
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| batch-level activity | An activity that must be accomplished for each batch of products rather than for each unit.
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| bill of activities (for a product or service) | A complete listing of the activities required for that product or service to be produced.
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| consumption ratio | The proportion of an activity consumed by a particular product.
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| cost driver | A characteristic of an activity or event that results in the incurrence of costs by that activity or event.
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| cost hierarchy | The classification of activities into levels, such as unit-level, batch-level, product-sustaining level, and facility-level activities.
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| facility- (or general-operations-) level activity | An activity that is required for an entire production process to occur.
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| product-sustaining-level activity | An activity that is needed to support an entire product line but is not always performed every time a new unit or batch of products is produced.
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| storyboarding | A procedure used to develop a detailed process flowchart, which visually represents activities and the relationships among the activities.
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| unit-level activity | An activity that must be done for each unit of production.
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| volume-based (or throughput-based) costing system | A product-costing system in which costs are assigned to products on the basis of a single activity base related to volume (e.g., direct-labor hours or machine hours).
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