What is traditional costing, Managerial Accounting

Assignment Help:

What is traditional costing

In traditional costing overheads are first related to cost centers (production and service centres) and then to cost object, i.e. production. ABC overheads are related to activities or grouped into cost pools (depending on the terminology preferred). Then they are related to the cost objects for example production. The two processes are therefore very similar but the first stage Is different as ABC uses activities instead of functional departments (cost centres) . the problem with functional departments is that they tend to include a series of different activities which incur a number of different cost that behave in different ways. Activities also tend to run across function for instance procurement of materials often includes raising a requisition note in a manufacturing department or stores. it is not in the purchasing department where most procurement costs are incurred. Activity cost tend behave in a similar way to the way in which casts behave.

As with traditional absorption costing ABC rates are calculated in advance normally for a year ahead and so the same rates are used for at a time. The advantage of this is that any seasonal variations will be spread giving an average cost. If this was not done and actual rates were used the absorption rates would vary monthly. This would mean that when output was high the overhead rate would be low and vice versa; if pricing were based on cost the prices quotes would be higher when the business was slack.

 


Related Discussions:- What is traditional costing

Advantages-disadvantages-imposed budgets, Advantages of Imposed budgets ...

Advantages of Imposed budgets Advantages: They increase the probability that the organization strategic plans are incorporated into the planned activities. They

State the capital turnover ratio, Capital turnover ratio  Meaning: th...

Capital turnover ratio  Meaning: this ratio establishes a relationship among net sales and capital employed. Objective: the objective of computing this ratio is to verif

Contigency theory, CONTIGENCY THEORY Some researchers have argued that ...

CONTIGENCY THEORY Some researchers have argued that the context in which budgetary control is used is as important as the style in which it is implemented and used. This is ter

Accounting cycle, Accounting Cycle is the name given to the combined proces...

Accounting Cycle is the name given to the combined process of recording and processing the accounting proceedings of a company. The series of steps start when a transaction takes p

#title.standard cost and variances., Direct materials,4yard at$3.50per yard...

Direct materials,4yard at$3.50per yard...$14.00 Direct labor,1.5direct labor hours at $12.00 per direct labor hour....$18 Variableoverhead,1.5 direct labour hours at $2.00 per dire

Differential analysis, Barker Company has a single product called a Zet. Th...

Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year at a selling price of $40 per unit. The company’s unit costs at this

What are the advantages of budgetary control, What are the Advantages of bu...

What are the Advantages of budgetary control This budgetary control system helps in fixing the goals for the organization as a whole and concerts efforts are made for its achie

Definition of cost reduction, Definition of Cost reduction Cost reducti...

Definition of Cost reduction Cost reduction is planned positive approach to reducing expenditure. Cost reduction exercises are planned campaigns to cut expenditure. It is a con

Explain management accounting, Explain Management accounting Meaning &...

Explain Management accounting Meaning & definition: Management accounting is comprises of two words, Management and accounting. It is the study of managerial aspect of the ac

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