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Engineering method
These methods are based on the use of engineering analysis of technological relationship between inputs and outputs e.g. method studies and time and motion studies.
The procedure in such a study is to make an analysis based on direct observation of the underlying physical quantities required for an activity and then to convert the final result into cost estimate.
This method is useful for estimating costs of repetitive processes where input and output relationship is clearly defined e.g. the cost associated with direct substances, direct labor and machine time.
Activity Based Costing (ABC) differs from Absorption Costing (AC) in the manner in which overheads are charged to units. ABC charges overheads to units based on their proportion
distinguish between cost unit and cost centre
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