Activity Cost Pool

AAA

DEFINITION of 'Activity Cost Pool'

In managerial accounting, a set of costs which are incurred when certain operations are performed within the organization. By accounting for all of the costs incurred in a specific activity with a pool, it is simpler to assign those costs to products and get an accurate estimate of production costs. Activity cost pool is an aggregate of all the costs required to perform a task such as production.

INVESTOPEDIA EXPLAINS 'Activity Cost Pool'

The best example of where activity costs are tracked and studied is in manufacturing. Given a plant which produces many different products, financial managers are tasked with the problem of how to accurately assign production costs to each product. Using activity-based costing is a popular method for assigning costs since it is a good compromise between efficiency and accuracy. Assigning costs accurately is important to determine the profitability of products and subsequently, to make rational production decisions.



RELATED TERMS
  1. Overhead Rate

    In managerial accounting, a cost added on to the direct costs ...
  2. Activity-Based Budgeting - ABB

    A method of budgeting in which the activities that incur costs ...
  3. Activity-Based Management - ABM

    A procedure that originated in the 1980s for analyzing the processes ...
  4. Accrual Accounting

    An accounting method that measures the performance and position ...
  5. Unit Cost

    The cost incurred by a company to produce, store and sell one ...
  6. Activity-Based Costing - ABC

    An accounting method that identifies the activities that a firm ...
Related Articles
  1. Identifying And Managing Business Risks
    Entrepreneurship

    Identifying And Managing Business Risks

  2. Getting To Know Business Models
    Entrepreneurship

    Getting To Know Business Models

  3. FYI On ROI: A Guide To Calculating Return ...
    Active Trading

    FYI On ROI: A Guide To Calculating Return ...

  4. Crisis Management Strategies For Business ...
    Entrepreneurship

    Crisis Management Strategies For Business ...

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center