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

Short term cash forecasts, The significant objectives of short-term cash fo...

The significant objectives of short-term cash forecast are as given: find out operating cash requirement anticipating short term financing Organization investment of

Line of credit, It is a commitment by a bank to lend a specific amount of f...

It is a commitment by a bank to lend a specific amount of funds on demand identifies the maximum amount of unsecured credit the bank will allow the customer to borrow at any time.

Cash planning, Firms need cash to invest in inventory, receivables and fixe...

Firms need cash to invest in inventory, receivables and fixed assets and to create payments for operating expenses, so as to increase earnings and sales and make sure the smooth ru

State the debtors turnover ratio, Debtors turnover ratio( or receivables tu...

Debtors turnover ratio( or receivables turnover ratio) Meaning: this ratio establishes a relation ship between net credit sales and averages trade debtors.   Objective

Bench marking, BENCH MARKING In the current business environment, organ...

BENCH MARKING In the current business environment, organizations are under a lot of pressure to improve performance and that of their divisions or subsidiaries. Bench marking i

Determining optimum cash balance, One of the main deities of the financial ...

One of the main deities of the financial manager is to keep a sound liquidity position for the firm hence the dues are settled as and while they mature. Separately from this the fi

Non-zero sum games, Non-Zero Sum Games Within very vast situations of p...

Non-Zero Sum Games Within very vast situations of possible non-zero games, varying degrees of co-operation exist between the participants. Games theory has been sufficiently de

Amount of working capital, Number of Operating Cycles: The number of opera...

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

Credit period, It refers to the length of time given to the buyer to pay fo...

It refers to the length of time given to the buyer to pay for their purchases. Throughout this period no interest is charged on the excellent amount. The credit period usually vari

Case study, Your company provides you with a car. You are told only to driv...

Your company provides you with a car. You are told only to drive in Dade and Broward and only to use the car for business purposes. One weekend your family is going to the Keys. Yo

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