Explain activity based costing versus traditional costing, Managerial Accounting

Activity based costing versus traditional costing

Following are the main differences between activity based costing system and traditional costing system:

Explain 

1) Under ABC system overhead costs are identified to each major activity in stead of the department as under traditional costing system. It results in greater number of cost centers under ABC system.

2) The term cost driver is not used under traditional costing system. Popular terms are basis of allocation or apportionment. Under ABC system cost delivers are fewer in number for the purpose of charging overheads to products.

3) ABC system uses separate rates for support centers and there is no reallocation to production centres as is the case under traditional costing system.

Thus traditional costing system reveals less accurate cost as compared to ABC system. This is primarily because cruise and effect relationship is considered under ABC system to identity support cost objects which is not the case under traditional costing system.

 

Posted Date: 7/8/2013 1:41:56 AM | Location : United States







Related Discussions:- Explain activity based costing versus traditional costing, Assignment Help, Ask Question on Explain activity based costing versus traditional costing, Get Answer, Expert's Help, Explain activity based costing versus traditional costing Discussions

Write discussion on Explain activity based costing versus traditional costing
Your posts are moderated
Related Questions

Accounts Payable Turnover Ratio is a short-term liquidity measure which is used to calculate the rate at which a company pays off its suppliers. Accounts payable turnover ratio is

Inappropriate standards (or targets): This is a problem arising from deficiencies in planning. If not enough time and resources are devoted to setting accurate standards in th

FLEXIBLE BUDGETING Flexible budget may be used in one of two ways: Planning and Control. At the planning stage when budgets are set, to reduce the effect of uncertainty. For ex

Number of Operating Cycles: The number of operating cycles in a period is determined by dividing the number of days in a year i.e.365 by the length of net operating cycle. Express

Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its


Explain Indirect expanses: These are expanses which can't be directly conveniently and wholly allocated to a specific cost centres or cost units examples of such expanses are h

Explain the External factors of pricing decisions 1) Demand: the market demand for a product or service obviously has big impact on pricing. Since demand is affected by fact

Factoring Services: All subsequent services are offer through the factor apart from the core service of purchasing receivables. 1)    Sales credit management and Ledger adminis