Explain activity based costing versus traditional costing, Managerial Accounting

Assignment Help:

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.

 


Related Discussions:- Explain activity based costing versus traditional costing

Calculate the net increase or decrease in monthly profit, Painter Ltd, whic...

Painter Ltd, which manufactures and sells a single product, is currently producing and selling 102,000 units per month, which represents 85% of its full capacity. Total monthly cos

Special orders, Issa Company manufactures a personal computer designed for ...

Issa Company manufactures a personal computer designed for use in schools and markets it under its own label. Issa has the capacity to produce 25000 units a year but is currently p

What are the objectives of intra company transfer pricing, What are the Obj...

What are the Objectives of Intra company transfer pricing The objectives of Intra company transfer pricing are: 1) Evolution of performance and efficiency of each division.

Acceptance and allocation of resources , Acceptance and Allocation of Resou...

Acceptance and Allocation of Resources Managers, subsequent a review and analysis of all decision packages, will establish the level of resources to be assigned to each decisi

Saddle point, Saddle Point The saddle point in a payoff matrix is one w...

Saddle Point The saddle point in a payoff matrix is one which is the smallest value in its row and the largest value in its column. It is also termed as equilibrium point in th

Summary journal entries, Stine Company uses a job order cost system. On May...

Stine Company uses a job order cost system. On May 1, the company has a balance in Work in Process Inventory of $3,730 and two jobs in process: Job No. 429 $2,150, and Job No. 430

Prisoner''s dilemma- non-zero sum games, Prisoner's Dilemma To understand...

Prisoner's Dilemma To understand the prisoner’s dilemma, let’s consider a story as follows: Two peoples are arrested for a crime. The police lack enough evidence to convict ei

Determine the need and importance of management accounting, Determine the N...

Determine the Need and importance of management accounting: 1.Increasing efficiency: management accounting increases efficiency of business operations. The targets of differe

Monitoring receivables, A firm requires continuously monitoring and control...

A firm requires continuously monitoring and controlling its receivables to make sure that the dues are paid on the due date and no dues stay outstanding for a long period of time.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd