Assume you are looking to share an apartment with another person, Joe. The rent for a 2-bedroom/2 bath apartment is $1,000 per month. Joe wants to split the rent 50/50. Prior to agreeing to this, you find out the following information: Joe’s bedroom is 20’ x 24’ or 480 square feet with an on suite bath. Your bedroom is 12’ x 10’ or 120 square feet and the bath will be used by visitors too. You think that the rent should be allocated between you and Joe based upon the relative square feet of your rooms. Whose method (Joe’s or yours) represents activity-based costing?
Assume you are looking to share an apartment with another person, Joe. The rent for a 2-bedroom/2 bath apartment is $1,000 per month. Joe wants to split the rent 50/50. Prior to agreeing to this, you find out the following information:
Joe’s bedroom is 20’ x 24’ or 480 square feet with an on suite bath.
Your bedroom is 12’ x 10’ or 120 square feet and the bath will be used by visitors too.
You think that the rent should be allocated between you and Joe based upon the relative square feet of your rooms.
Whose method (Joe’s or yours) represents activity-based costing?
Activity Based Costing
Activity based costing is refer as the method of costing which identifies the organization’s activities and the cost is assign to each activity according to the actual consumption.
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