4 similarities between Activity Based Costing and traditional system of assigning overhead to product.



Activity based costing are method of costing in which overhead fixed cost are allocated to product basing on how activities involved in making those products consumed the fixed overhead fixed cost. Traditional costing in other hand is method of allocating overhead fixed cost to product using arbitrary bases such as machine hours or labor hours.

The following are similarities between activity based costing and traditional system of assigning overhead to product;



They all apply allocation, apportionment and absorption

There may be over and under absorbed overhead if the predetermined rate are used

They all use cost centers that are consistent with the operating system

The same subjective basis of apportioning some overhead are applied.

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