Steps used in activity base costing?

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What is the difference between Activity-based costing and traditional cost accounting?

Activity-based costing is a more accurate cost management system than TCA. One would use the ABC method when overhead is high, products are diverse, cost of errors high and competition is stiff. Traditional Cost Accounting is unable to calculate the 'true' cost of the product. TCA arbitrarily alloca (MORE)

What is the difference between traditional based costing and activity based costing?

Traditional based costing systems typically use a single overheadpool - that is a single accumulation of costs that are not directlyidentifiable as product part costs or as labor. This would includesupply and maintenance expenses, allocations of managementsalaries, depreciation, etc. Activity based (MORE)

Why activity based costing is better than the traditional system of costing?

ABC....why? The problem with Traditional costing is that it caneasily over-allocate overhead to cost objectives. Traditionalcosting is production volume driven so its would be easy but yetinaccurate to assign a Skittles production with more overhead thansay a the division within the same company tha (MORE)

What are the benefits of activity-based costing?

Advantages of Activity Based Costing System : Activity based costing system has the following main advantages / benefits: . More accurate costing of products/services, customers, SKUs, distribution channels. . Better understanding overhead. . Easier to understand for everyone. . Unit cost rat (MORE)

What is activity based costing?

What is Activity Based Costing ? . Activity Based Costing(ABC) Is a more recent approach to product costing ,pioneered by Professor Kaplan and Cooper . ABC is an attempt to reflect more accuratly in product costs those activities wich influence the level of support overheads includes such items a (MORE)

What factors contributed to the emergence of activity based costing in the 1980s?

The Traditional costing system used to allocate/assign overhead costs to products by using only volume based cost drivers. In fact, these traditional systems were designed decades ago when most companies manufactured a narrow range of products, and direct labour and materials were the dominant facto (MORE)

How does activity based costing relate to the objectives of a company?

Activity Based Costing does the calculation of costs, that can be segregated as Product, Service, Business Sustaining and Available to Use Costs. Mere calculation of those costs practically would not help anybody. Once has to go beyond those calculations and anlyse those costs. After analyzing (whic (MORE)

What are the similarities of activity based costing system and traditional costing method?

Answer . Traditional costing and activity-based costing (ABC) is to comment on the uniqueness of the products received. In traditional based costing, costs can be allocated to all products, because they are not unique. Traditional based costing works well for homogenous products that go through t (MORE)

Explain why Activity based costing was developed?

The concepts of ABC were first introduced within the manufacturing sector in U.S. during the 1970s to 1980s. It has been later refined and improved upon over the years.. For example, a machine manufactures two products. Assuming that the production volume of the two products is the same, using trad (MORE)

Can Activity Based Costing be used in a service company?

ABC is generally used in the manufacturing industry, but I suppose if you have distinct services that you are providing you could make it work. You'd have to be able to separate your costs between the different services that you offer. Perhaps setting up various cost centres, or activity codes for t (MORE)

Difference between activity based costing and job costing?

Activity Based Costing (ABC) is one of several approaches to job costing. \n. \nTraditionally, job costing has been measured by allocating all direct costs associated with a certain job as well as 'a fair share' (usually based on direct labour hours or volume) of the total indirect costs/overheads (MORE)

Does Activity Based Costing produce an accurate costing picture?

Hi. Activity Based Costing could be seen as the 'Cause-and-Effect' realtionship in the costs. If we extend this logic then we can segregate all the costs in four sections.. a) Product Costs b) Customer Costs c) Business Sustaining Costs d) Cost available to use. In this sense the Activity Basedd (MORE)

What are the disadvantages of activity based costing?

Activity Based Costing Disadvantages . · 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. It may be difficult to set up and estab (MORE)

Limitations of activity based costing?

There are several limitations to ABC. Firstly it is expense to implement and maintain, both in time and money. It still faces issue allocating some overheads to activities, for example supervisor salaries. Management and employees can be resistant to the data it provides as it can make their perfor (MORE)

Activity based costing and cost drivers?

The best way to figure cost, and driver cost is to install a vehicle tracking system. This will give you very accurate reporting on employee use and time. In addition, you can track your vehicles and be notified if they leave a route have been stolen and much more. I recommend the Millennium Plus, i (MORE)

What are Activities for Activity Based Costing?

This approach aims at deleting all the activities that do not add value and support all the activities that add value. Accordingly, the organization avoids all costs that are paid for no reason, i.e will save more money to support and enhance the quality of its final product/s.... etc. Written by: S (MORE)

Advantages and disadvantages of activity-based costing system?

Activity Based Costing Advantages . 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 cont (MORE)

What is mechanics of activity based costing?

mechanics of ABC system consists of : -overview -first-stage allocation -the other activity cost pool - Computation of activity rates - Second-stage allocations of costs to cost objects - Product and customer margins---activity view

Why you prefer activity based costing over functional based costing system?

Activity Based Costing provides:. More Accurate . Product/Service Profitability . Customer Profitability . Distribution Channel Profitability . Make versus Buy Decision . Process Costs . Superior Information . Capacity Considerations . Automation Decisions . Outsourcing Decisions . Supply (MORE)

Can Activity based Costing be used for an IT Company like Infosys Wipro?

In a simple answer, yes. Activity based costing can be a valuable tool for any environment that either makes something (manufacturing) or delivers something (service - such as IT outsourcing). One option would be to use driver data mapping services to specific customers to calculate "actual" cost es (MORE)

Describe the key features of activity-based costing?

A key feature of activity-based costing is realizing that the valueof a product changes as it is being produced. This would mean thatraw materials should cost less than the finished product. Forexample, a dress starts out as just a piece of material, but afterit is sewn together, it has more worth t (MORE)

What companies use Activity-based costing?

This approach aims at deleting all the activities that do not add value and support all the activities that add value. Accordingly, the organization avoids all costs that are paid for no reason,

How activity-based costing could overcome the deficiencies inherent in the existing costing system?

Greetings. . Your questions does not tell about the existing costing system but I assume that you are using the 'traditional' way of costing as standard costing. . The major deficiency is that when we talk about costing, we are always assuming that is 'Product Costing'. By doing this we take all t (MORE)

How does Activity-Based Costing work?

Activity-based costing (ABC) systems for applying overhead is a two-stage procedure. . The first step begins with identifying significant activities in the production of the products (that is grouping similar activities into an activity pool ) and assigning a cost to that pool according to the a (MORE)

Contribution Margin and activity-based costing?

Contribution margin tells the management for important decision that how much a single unit contributing towards recovery of fixed cost. Activity based costing allocates the overhead costs to activities based on number of activities instead of predetermined rate.

What is activity bases costing?

Activity based costing is the method in which overhead cost isallocated based on activities performed by departments and not byusing any predetermined rate.

Activity-based costing and activity-based management are synonymous?

Activity Based Costing (ABC) is a procedure used to assign overhead cost to products or services that are produced. (I actually just answered this elsewhere, if you want more detail see: http://wiki.answers.com/Q/How_does_Activity-Based_Costing_work ). . Activity Based Management (ABM) is the us (MORE)

What does a well designed activity based costing system start with?

An Activity Based costing always starts with defining your objective. why do you want to implement this system? This definition is very important. Then the scope of the project and then the phases. The typical onjectives of the ABC system would fall under one the following three; 1) Understand Pro (MORE)

What is the difference between target costing and activity based costing?

Activity Based Costing In an ABC structure, organizational departments that have served as cost centers, where costs are accumulated for allocation to products or services, are replaced by organizational activities through which costs are viewed. The heart of ABC is to trace and account for the poo (MORE)

When not to use Activity Based Costing?

I would like to answer this questions humorously. Pl do not use Activity Based Costing if; 1) You do not want to understand the profitability of the products, customers, channels. the true costs and cost drivers for the profitability. 2) You do not want to set targets based on the profitabilit (MORE)

Where is activity-based costing information helpful?

ABC information is extremely helpful in the strategic analysis of areas such as process and plant layout redesign, pricing, customer values, sourcing, evaluation of competitive position, and product strategy.

What is an example of an input in activity-based costing?

Resources are inputs, such as materials, labor, equipment, and other economic elements consumed by an activity in the production of an output. Outputs are products, services, and accompanying information flowing from an activity.

How would you describe activity-based costing?

Activity-based costing is a form of cost refinement, designed to obtain greater accuracy than traditional allocations in cost assignments for product costing and decision-making purposes.

What are the three characteristics of activity Based costing?

The important characteristics of ABC are noted below: v 1)Simple traditional distinction made between fixed cost and variable cost is not enough guide to provide quality information to design a cost system. v 2)The more appropriate distinction between cost behaviour patterns are volume(scale) rel (MORE)

Who develop activity based costing?

Activity-based management and activity-based costing (ABM/ABC) have brought about radical change in cost management systems. ABM has grown largely out of the work of the Texas-based Consortium for Advanced Manufacturing-International (CAM-I). No longer is ABM's applicability limited to manuf (MORE)

Why activity based costing?

Activity based costing allocate the overhead expenses based onactivities performed and that's why it is an accurate way toallocate overhead expenses while in absorption costing, overheadsare allocated based on some ratios or predetermined rate which isnot accurate method of allocation of cost.