What is Activity based costing ? The Epping Furniture company produces a range of different…

(a) What is Activity based costing ?

(b) The Epping Furniture company produces a range of different furniture such

as chairs for home and business, tables for different uses such as homes

and business ,as well as specialised computer chairs and furniture .Explain

how the firm would be able to use Activity based costing in costing its

different items of furniture .

(a). Answer: Activity based costing assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs based on machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead.

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