Kategorien: Alle - decision - implementation - costing - accuracy

von anisah mahmood Vor 16 Jahren

572

Activity Based Costi

Activity Based Costing (ABC) is a method that assigns costs to products based on their usage of activities, providing a more accurate reflection of overhead costs. This approach is particularly beneficial for companies with a wide range of products or complex production processes, where traditional costing methods might inaccurately allocate overheads.

Activity Based Costi

Activity Based Costing

ABC is where cost is attributed to cost unit based on the cost unit usage of activity

Implication

Decision making
Product change
Discontinuation
Promotion
Pricing

Why ABC

high volume product will tend to bear higher overheads in trad.
many cost are driven by non volume related act.complexity/range
overhead constitute large part of cost than dl dm
Wider range of products

Disadvantages

a cost sriver may/may not explain all cost in c/pool
some item may use other means of appn like rent,depn etc
problematic implementn
cost benefits of accuracy
only measurable cost drives can be used

The method

Step 4: CHARGE to cost units based on their usage of the activity
Step3: For each cost driver cost pools
Step 2: Cost drivers ( factors which determine the cost of activity)
Step 1Major activity
example:purchasing acti, prodn etc

Advantages

more ohd cost beyond factory floor
better costing of pdt with complex prodn process
better u/std what drives ohd costs
Subtopic

Definition: ?

"activities go up cost go up''
products demand activites
activities drives cost