A Practical Application Of Multiple Activity Based Costing

Abstract

Professors Cooper and Kaplan (1988a and 1988b) recommend the allocation of overhead based on “activities” which cause the overhead cost; a process they have named “Activity Based Costing” (ABC).  ABC has thus far been limited to the use of a single activity to allocate any cost pool.  This paper argues that most cost pools have multiple cost drivers and should therefore be allocated using multiple activities and introduces the concept of Multiple Activity Based Costing.