In the ABC costing system the cost are allocating based on activity rather than product or services. For the purpose of assigning the coat to a particular activity, cost drivers are used. In the aviation industry the rates of the travelling ticket are depend over the cost of flying. If the costs are apportioned based on activity then the cost is determined more accurately. The organisation is fixing the prices of the ticket based on the cost determined above. Due to which the organisation is achieving the competitive advantage and capable to improve business.
Ava Thomas