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to allocate over heads by Activity with its own allocation base , ABC depending upon a different bases according to the activity itself like : Electricity by Sq/F , Machines Deprecation by Machine/hr , HR department by number of manpower .. so it well get more accuracy for top management decisions.
The reason for using activity-based costing is to allocate overhead accurately which leads to more accurate information and thus can supplement to a better and informed decision-making. Activity-based costing uses causal relationship between the cost object and cost driver.
