Traditional Overhead Allocation and Activity Based Costing, Cost Accounting

The controller for U.S. Route 66 Truck Parts is comparing traditional overhead allocationwith ABC. After studying both approaches, the controller prepared the following list of features and attributes of the two methods.

Required: Label each the listed items as either belonging to traditional overhead allocation (TOA) or activity-based costing (ABC).

1. More complex system

2. Does not aid in cost reduction

3. Uses only a few cost pools

4. Uses several allocation bases

5. Is expensive to implement

6. Probably accurate enough for the company as a whole

7. Correlative relationship exists between allocation base and cost

8. Casual relationship exists between allocation base and cost

9. Uses many cost pools

10. Not very accurate on a product by product cost level

Posted Date: 3/20/2013 4:03:25 AM | Location : United States







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