Archive about 'Activity Based Costing'
Tweet In cost accounting, besides looking at marginal and total costing, we have the activity-based costing where the stages or process involves the following: Different stages/steps in activity-based costing are: Identify the different activities within the organization Relate the overheads cost to the identified activities Support activities are then spread across the primary activities Determine […]
Tweet A cost driver: Is any factor whose change causes a change in the total cost of a related cost object. Hence a change in the level of cost driver will cause a change in the level of the total cost of a related cost object. Examples of cost driver used in the following business […]
Tweet Salient points On Activity-based costing(ABC) 1.0 Activity-based costing(ABC) was developed/designed during the 1980s to avoid the shortcoming of absorption costing and marginal costing. 1.1 Shortcoming of Absorption costing –produce misleading product costs 1.2 Shortcoming of Marginal costing-does not attempt to connect general overhead costs to products. Also produce misleading product costs 2.0 CIMA defines […]
Tweet Activity-Based-Costing System In Relation To Activity-Based-Management (ABM) Activity-Based-Management describes management decisions that use activity-based costing information to satisfy customers and improve profits. Some areas involved: Product pricing and mix decisions Cost reduction and process improvement decisions Design decisions Product Pricing and Mix Decisions ABC gives management insight into the cost structures for making and […]
Tweet Like any Costing System, for the successful implementation of Activity-Based-Costing System, we need to understand and ensure that the following critical factors in an organization are in existent: Characteristics of Successful ABC Implementations (1) Strong Top Management Support Without leadership from top management, some managers may not see any reason to change nor consider […]