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

Benefits/ disadvantages of the costing techniques , Question 1 A healt...

Question 1 A healthcare company specializes in hip, knee and shoulder replacement operations, known as surgical procedures. As well as providing these surgical procedures, the

Explain phases of life cycle of a product, Q. Explain Phases of life cycle ...

Q. Explain Phases of life cycle of a product? Every product move through a life cycle having five phases as shown in figure and they are 1) Pricing during introduction 2)

Illustrate the important steps of budgetary control, Important steps of bud...

Important steps of budgetary control There are certain steps which are essential for the successful implementation of a budgetary control system. They are as follows: 1) Or

Definition of activities based costing, Definition of Activities based cost...

Definition of Activities based costing Activity based costing is a system that focuses on activities as the fundamental cost objects and uses the costs of these activities as b

Determine the value of equipment at the current date, A company is preparin...

A company is preparing a value in use calculation for a factory building and the equipment used to make a particular product. It has prepared cash flows for the next five years fro

Evaluate consumer surplus and the average price, Suppose the consumer is at...

Suppose the consumer is at coffee shop 2. Coffee shop 2 provides unlimited cups of coffee for the price of $9.00 per day. - How many cups would she drink a day and how much woul

Financial statement, how to i get financial report for my company Anuz Wpp

how to i get financial report for my company Anuz Wpp

Decision - making, Decision Making Some managers appear to have an...

Decision Making Some managers appear to have an intuitive sense of good decision making. The reality is that good decision making is hardly ever done by intuition. Consist

Inventory control decisions, INVENTORY CONTROL DECISIONS Factories, wor...

INVENTORY CONTROL DECISIONS Factories, workshops, engineering departments handle raw materials used in the manufacture of products. The main objectives in handling these materi

State the price determination under the market condition, State the price d...

State the price determination under the market condition The price determination under the following market condition is as follows: 1) Pure competition: in this situation

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