Activity base

An activity base is a measured activity that is used to allocate overhead costs. For example, the number of machine hours used during a reporting period is a reasonable activity to use as the basis for allocating machine costs to units produced. Or, the number of labor hours consumed in the production area can be used as the basis for allocating indirect labor costs to units produced. A more complex allocation system might employ several activity bases.

Related Courses

Activity-Based Costing
Activity-Based Management
Cost Accounting Fundamentals