Page 254 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 14: Introduction to Recent Development in Cost Management

The ABC not only enlists the number of activities but also classifies them into two categories viz Notes
primary activity and secondary activity.
Primary activity is an activity which directly charges to cost object, which could be classifi ed into
two different categories, in accordance with the nature of business viz Product and Service.

Figure 14.3

Primary Activity

Manufacturing Service

Unit Activity Unit Activity

Batch Activity Batch Activity

Product Activity Service Activity

Example: Let us discuss the manufacturing activity with an example of car-manufacturing
unit.
The following unit activity explains the important activities of the car-manufacturing unit and
their activity drivers.
Figure 14.4

Planning, Dyeing Machine Hours
Unit Activity

Electrical Wiring, Assembly Direct Labour Hrs

The next important classification is Batch Activity. It is most suitable in the case of pharmaceuticals,
cement, peripherals, watch industry, etc.
Figure 14.5

Number of Movers
Moving materials on the
conveyor belt
Moves per hour
Batch Activity
Quality check
Number of products

Time per inspection

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