In activity-based costing, a collection of indirect costs grouped according to the activity involved. To identify the costs of each activity, cost pool managers will have to ask such questions as:
Each activity cost pool has one or more relevant activity measures (or cost drivers) that are used in allocating costs, for example:
The size of a particular cost pool will vary widely from one organization to another. For example, a cost pool for order processing may include hundreds of staff in a large organization, whereas a smaller organization may not have a separate cost pool for this activity as it involves only one or two staff. Note that some costs may not be included in any activity cost pool, usually because they are too minor or too difficult to allocate in this way.
Activity cost pool
Number of orders
Number of product designs
Number of deliveries
Other costs not included