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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 Costing gives an accurate costing picture.
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 profitability. 3) You not want to optimize the profits by optimizing customer segments 4) You do not want to optimize the processes and their costs 5) You not want to use a flexible reporting system that helps to take operating, tactical and strategic business decisions. More on this on the link below.
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,
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 allocates overhead to the costs of objects. Total company's overhead is allocated to the products based on volume based measure e.g. labor hours, machine hours.
What the characteristic of company that use ABC method?
Which of the following is a characteristic of ABC? a. Improved financial reporting b. aid to managers in determining product cost c. used in place of job or process costing d. use restricted to manufacturing entities Answer: b. aid to managers in determining product cost Reference: Chapter 8, Activity Based Costing, Managerial Accounting by Garrison
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 Costing gives an accurate costing picture.
What has the author Dervla Geraghty written?
Dervla Geraghty has written: 'The practical use of activity based costing in Ireland'
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 estimates by service by customer in addition to tradional "activity" analysis.
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 profitability. 3) You not want to optimize the profits by optimizing customer segments 4) You do not want to optimize the processes and their costs 5) You not want to use a flexible reporting system that helps to take operating, tactical and strategic business decisions. More on this on the link below.
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 (which can be performed in various ways) find out the action poins and work on them. Activity Based Costing is a concepts that can be used to support for various objective of the company. These objectives can be grouped in three parts a) Product and Customer Profitability b) Process and cost improvements c) Resource planning.
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 as Inspection, Dispatch, Production Planing , Set up, tooling and similar costs. ABC system uses many drivers as absorption bases. Because of this , it claims that the use of ABC and several cost driver rates produces more realistic product or service cost specialy when the support costs are high.
What is the fullform of ABC?
ABC stands for Activity Based Costing, which is an accounting system that assigns costs of specific activities to the products that use them rather than applying all overhead to every product equally.
What are the implications of a switch to activity based costing on pricing?
Many argue that ABC actually discourages improvement to operational strategies that encourage proper use of resources. It is implied that it may not be as cost effective as expected.
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,
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 allocates overhead to the costs of objects. Total company's overhead is allocated to the products based on volume based measure e.g. labor hours, machine hours.
What the characteristic of company that use ABC method?
Which of the following is a characteristic of ABC? a. Improved financial reporting b. aid to managers in determining product cost c. used in place of job or process costing d. use restricted to manufacturing entities Answer: b. aid to managers in determining product cost Reference: Chapter 8, Activity Based Costing, Managerial Accounting by Garrison
If you were a candy manufacturer which costing system should you use full absorption costing or variable costing?
full absorption costing
