One of the best tools for refining a costing system is activity-based costing. Activity based costing (ABC) systems refine costing systems by focusing on individual activities as the fundamental cost objects. An activity is an event, task, or unit of work with a specified purpose; for example, designing products, setting up machines, operating machines, and distributing products, setting up machines, operating and distributing products. ABC systems calculate the costs of individual activities and assign costs to cost objects such as products and services on the basis of the activities of the activities undertaken to produce each product or service
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