Functional-Based costing vs ABC

Let’s Talk Business Accounting and Finance Functional-Based costing vs ABC

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    Uttam Pai
    Functional costs consist of the total costs of all the activities performed by a functional unit of a business. Functional-based costing considers total expenses incurred at the departmental, business unit, or functional levels.
    Activity-based costing (ABC), on the other hand, allocates expenses based on the activities performed by each of the departments or functional units of a business. Rather than adding all costs incurred in a single department or function, ABC breaks departmental workflows down into component tasks. Activity-based costing considers cost drivers, such as the time taken and space required for each task, customers served, etc., to determine the cost of different activities.

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