Attribute-based costing (ABC II), an extension of activity-based costing, employs detailed cost–benefit analyses relating to information on customer needs (in terms of performance attributes of a product such as reliability, durability, responsiveness, and so forth) and the costs of the incremental improvements necessary to obtain these attributes. ABC II employs planned costs rather than past costs because, as discussed earlier, such a high percentage of a product’s life-cycle costs are locked in during the product’s development stage. The approach focuses on satisfying customer needs by searching for the optimum enhancement of customer utility through comparisons of alternatives for attribute enhancements relative to the costs of producing those enhancements.
A vital loss of information may occur in an accounting system that ignores activity and cost relationships. Not every accounting system using direct labor or machine hours as the cost driver is providing inadequate or inaccurate cost information.
A vital loss of information may occur in an accounting system that ignores activity and cost relationships. Not every accounting system using direct labor or machine hours as the cost driver is providing inadequate or inaccurate cost information.