## Product Cost Statement: Absorption Costing vs ABC
The prime cost section (Direct Material + Direct Labour + Direct Expenses) is identical under both methods. The difference lies entirely in how factory overhead is loaded.
### Under Overhead Absorption Costing
Factory overhead is charged department-wise using an absorption rate:
> Factory Overhead = OH Absorption Rate x Actual Base Quantity Consumed
| Particulars | Amount (₹) |
|---|---|
| Direct Material | xxx |
| Direct Labour | xxx |
| Direct Expenses | xxx |
| Factory Overhead — Department A | xxx |
| Factory Overhead — Department B | xxx |
| Total Cost | xxx |
### Under ABC
Factory overhead is charged activity-wise using cost driver rates:
> Factory Overhead = Cost Driver Rate x Cost Driver Quantity
| Particulars | Amount (₹) |
|---|---|
| Direct Material | xxx |
| Direct Labour | xxx |
| Direct Expenses | xxx |
| Factory Overhead — Activity 1 | xxx |
| Factory Overhead — Activity 2 | xxx |
| Factory Overhead — Activity 3 | xxx |
| Total Cost | xxx |
### Key takeaway
The total overhead pool to be absorbed is the same under both methods; ABC merely redistributes it across products more accurately by tracing each slice to its causal activity rather than to a department base.