What is an Activity Dictionary?

An activity dictionary is a document that identifies and describes each of the activities within a business. It is a useful reference for anyone involved in an activity-based costing or activity-based management effort, since it provides a massive amount of information that can be incorporated into an analysis project. The dictionary includes the following items:

Name of the activity. This is a brief description of the activity.
Name of the related business process. This is the process within which the activity is located.
Description of the activity. This describes the function of the activity.
Tasks associated with the activity. This briefly itemizes the tasks performed within the activity.
Outputs generated by the activity. This states the different types of outputs generated by the tasks within the activity.
Measurements for the output of the activity. This states the metrics being used to measure the output generated by the activity.
User(s) of the activity. This identifies the job positions that participate in the activity.
Value added or non-value added flag. This flag indicates whether the activity adds value to the underlying product. It is used for non-value-added analyses.
Cost drivers associated with the activity. This is whatever triggers a change in the cost of an activity, such as the number of direct labor hours worked or the number of machine hours used.

Related AccountingTools Courses

Activity-Based Costing

Activity-Based Management

Example of an Activity Dictionary

Here are several entries that might be found in an activity dictionary:

Activity: Receiving materials. Involves unloading raw materials from supplier deliveries, inspecting for quality and quantity accuracy, documenting received goods, and transferring items to warehouse locations. Cost driver is the number of deliveries received. Output measure is the number of shipments received per month.
Activity: Machine setup. Involves preparing equipment and machinery for specific manufacturing tasks, including calibration, configuration, tool changing, and testing prior to the start of production runs. Cost driver is the number of machine setups performed. Output measure is the total setups completed per month.
Activity: Product assembly. Involves assembling components and parts into finished products, adhering strictly to product specifications, quality standards, and manufacturing guidelines. Cost driver is the number of products assembled or direct labor hours used. Output measure is the units assembled per shift/day/month.
Activity: Quality inspection and testing. Involves performing quality assurance checks and testing finished products or components to ensure compliance with company standards and customer specifications. Cost driver is the number of inspections/tests performed. Output measure is the number of units inspected or number of tests completed per period.
Activity: Customer order processing. Involves receiving, reviewing, and entering customer orders into the sales and inventory management system, including order verification and follow-up communication with customers. Cost driver is the number of orders processed. Output measure is the number of orders processed per day/ month.
Activity: Packaging and shipping. Involves packaging finished products according to company standards, arranging logistics, labeling shipments, and managing transport and delivery to customers. Cost driver is the number of shipments prepared/shipped. Output measure is the number of shipments dispatched per day/week/month.
Activity: Equipment maintenance. Involves conducting routine maintenance, repairs, and preventive actions on manufacturing equipment to ensure continuous, reliable operation and minimize downtime. Cost driver is the number of maintenance hours or maintenance tasks performed. Output measure is the total maintenance tasks/hours per month.
Activity: Billing and accounts receivable management. Involves issuing accurate customer invoices, managing payment collections, and recording transactions in accounting systems to maintain accurate accounts receivable records. Cost driver is the number of invoices issued or transactions processed. Output measure is the number of invoices issued and processed per month.