A cost hierarchy and a bill of activities are tools for the implementation of activity-based costing.

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Both a cost hierarchy and a bill of activities are essential tools in the implementation of activity-based costing (ABC). A cost hierarchy categorizes costs into different levels based on their traceability to products or services. A bill of activities captures all the activities involved in producing a product or service and assigns costs to each activity based on the resources consumed. ABC uses these tools to assign costs more accurately to products and services based on their actual use of resources, rather than on arbitrary measures such as direct labor hours or machine hours.

A Cost Hierarchy and a Bill of Activities Are Tools