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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

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โˆ™ 2017-12-10 17:00:48
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Q: Why activity based costing is better than the traditional system of costing?
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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.

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.

What is activity based costing system and traditional system and this affect on variance?

Ask your Mom she might know shes old

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

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

What are advantages of traditional costing system?

It is easy to use.

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 rather than just total cost.Enables costing of processes, supply chains, and value streams

Why does over costing and under costing occur with traditional costing system?

Over costing and under costing occurs because overhead cost is applied first using some ratio to find out the cost of product before the process of production done and actual cost found.

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?


Why do you need product costing system?

needs of product costing system

What are other key activity changes of the Libre system vs the traditional Inquirer system?


What habit and custom dictate the rules for all economic activity in the system?


If you were a candy manufacturer which costing system should you use full absorption costing or variable costing?

full absorption costing

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

When is a job order costing system more appropriate than a process costing system?

Job order costing is more appropriate than process costing when the product being produced is a custom product

When job order costing system would be more appropriate than process costing system?

A job order costing system would be more appropriate than a process costing system for manufacturers who use different types of goods throughout the manufacturing process. Process costing is best to you when manufacturing a large amount of the same items.

What is a traditional costing system?

a costing system that does not divide cost by function or allocation or een by each part of the manufacturing process. it takes a total cost and divides it by each part of the process. so essentially each part of the manufacturing process is assigned an equal estimated cost.

How does an actual costing system different from a normal costing system?

actual is the actual cost, normal is estimating

What are the main features of standard costing system?

features of standard costing

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 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 factory costs. Overheads costs were relatively small and the distortions arising from inappropriate overhead allocations were not significant. Danish Ayub

Which activity would be most characteristic of people in a traditional society?

estaflishing a mercantile system of trade

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