Key Cost Accounting Concepts: ROI, Operating Income, Budgeting & ABC Costing

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Last updated 9:25 PM on 4/23/26

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Operating Income

Sales - Variable Costs - Fixed Costs

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Return on Investment (ROI)

Operating Income ÷ Average Operating Assets

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Flexible Budget Formula

Fixed Cost + (Variable Rate × Activity Level)

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ABC Cost Driver Rate

Estimated Overhead Cost Pool ÷ Estimated Total Driver Activity

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ABC Cost Assigned

Driver Rate × Actual Driver Usage

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Traditional Overhead Rate

Total Overhead ÷ Total Allocation Base

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Overcosted / Undercosted

Traditional > ABC = Overcosted

Traditional < ABC = Undercoste