Advantages and disadvantages of activity-based costing system?

Answer 1

ABC....why? The problem with Traditional costing is that it can easily over-allocate overhead to cost objectives. Traditional costing is production volume driven so its would be easy but yet inaccurate to assign a Skittles production with more overhead than say a the division within the same company that makes custom pies. Activity based costing accounts for the multiple costs that go into making a product or service thus making allocation of overhead more efficient and allowing managers to make better business decisions. Derek Coleman

Answer 2

* More accurate costing of products/services, customers, SKUs, distribution channels * Better understanding overhead* Easier to understand for everyone * Utilizes unit cost rather than just total cost * Integrates well with Six Sigma and other continuous improvement programs * Makes visible waste and non-value added * Supports performance management and scorecards * Enables costing of processes, supply chains, and value streams * Activity Based Costing mirrors way work is done * Facilitates benchmarking * More time consuming to collect data * Cost of buying, implementing and maintaining activity based system * Makes waste visible which some executives and managers don't want their boss to see

Answer 3

Could you pl elaborate your question? This will help in answering the question.

Answer 4

Activity-based costing tries to take the nonuniformity of resource consumption across products into account in the assignment of costs.