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

Mba, Describe the impact of different types of standards on motivations, an...

Describe the impact of different types of standards on motivations, and specifically, the likely effect on motivation of adopting the labor standard recommended for Geeta & Company

Define briefly about pricing decision, Pricing decision Price may be de...

Pricing decision Price may be defined as the exchange of goods or services in terms of money. Without price firm can survive in the society. If money is not there exchange of g

Quick Question About WACC (Weighted Average Cost of Capital), when assessin...

when assessing Market Value of common stock, is the "market value" the market value when the company sold the stock or the current market value?

Credit investigation, Once the credit information is accumulated the subseq...

Once the credit information is accumulated the subsequent step is to analyze the gathered information and isolate those matters that may need further investigation. The factors whi

Questions., how long will it take to get answers after question are submitt...

how long will it take to get answers after question are submitted

Distinguish between advertising and public relation, Question 1: a. Dis...

Question 1: a. Distinguish between Advertising and Public Relation? b. Discuss the methods adopted by a Public Relation company in promoting the image of a destination in th

Determine the zero bases budgeting according to leonard mere, Determine the...

Determine the Zero bases budgeting According to Leonard mere According to Leonard mere,  ZBB is a technique which complements and links the existing planning budgeting and revi

Determine the cash flow budget - monthly cash disbursement, where can I get...

where can I get the solution for the question on this link: http://www.expertsmind.com/questions/determine-the-cash-flow-budget-monthly-cash-disbursement-30145416.aspx I have att

Steps making decisiontree, Steps making DecisionTree A decision tree is...

Steps making DecisionTree A decision tree is a graphical representation of decision process indicating decision alternatives, states of nature, related probabilities and condit

Accounting rate of return - arr, ARR gives a fast estimate of a project's v...

ARR gives a fast estimate of a project's value over its useful life. ARR is derived by determining profits before taxes and interest.   ARR is an accounting technique used fo

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