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Why you prefer activity based costing over functional based costing system?
Wiki User
∙ 14y ago
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 Chain Determination ** Transfer Pricing Determinations ** Acquisition Synergy Calculations ** e-commerce Decisions That is why activity based costing is preffered. Moreover, Brimson identifies benefits from Activity Accounting: * Providing insight into the fastest-growing and least visible element of cost-overhead * Improving profitability by monitoring total life-cycle cost and performance * Improving the effectiveness of budgeting by identifying the cost/performance relationship of different service levels * Encouraging continuous improvement and total quality control because planning and control are directed at process level * Linking corporate strategy to operational decision making * Facilitating elimination of waste by providing visibility of non-value added activities * Improving make/buy, estimating, and pricing decisions that are based on product cost that mirrors the manufacturing process
Wiki User
∙ 14y ago
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Problem relating to the implementation of activity based costing and activity based management system?
Answering "Problem relating to the implementation of activity based costing and activity based management system
What are the differences between activity-based absorption costing system and traditional absorption costing system?
An activity-based absorption costing system defines the cost by how many activities a product unit uses. A traditional absorption costing system defines the cost by how much money went into making the product unit.
How does activity based costing differ from traditional based costing?
Activity based costing has primary difference of allocation of overheads which are based on activities performed by any department while in traditional costing system overheads are allocated on predetermined rate which may be not very accurate.
What is activity based costing system and traditional system and this affect on variance?
Ask your Mom she might know shes old
How do activity-based costing and the traditional cost system treat idle capacity costs differently?
Traditional costing system allocates the idle capacity cost to completed units while activity based costing only allocates the cost of capacity which is utilized while remaining capacity is expensed to income statement as period cost.
A well-designed activity-based costing system starts with?
assigning manufacturing overhead costs for each activity cost pool to products
True or false direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system?
False
How is ABC different from Traditional costing system?
In traditional costing system overheads are spread over volume of production by using spread rate which is called blanket rate or absorption rate while in ABC costing costs are allocated on the bases of actual activity performed in specific cost centers so this is a accurate method for allocating costs according to activity performed and not with just any estimated rates
Why do you need product costing system?
needs of product costing system
An accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost driver is?
Activity-based costing.
What is another name for absorption costing?
Full costing system
If you were a candy manufacturer which costing system should you use full absorption costing or variable costing?
full absorption costing
