ACTIVITY BASED COSTING

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4 limitation of activity based costing.

Activity based costing is method of allocating overhead cost by allocating it basing on the activities which drive it rather than using arbitrary allocation base as in the traditional costing.



The following are limitation of activity based costing

Since activity based costing trace fixed overhead cost to activity causing them, to do so need more … Read the rest

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5 advantages of Activity Based Costing (ABC).

Activitybased costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each.



Advantages of activity based costing:

  • ABC is flexible enough to trace cost to processes, customer’s areas of
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Revision question on activity based costing (ABC)

(A)     XX glass limited has been in operation for the past seven years and manufactures shower doors. Since its establishment, the company has used a traditional overhead absorption costing system. However, the managing director, Peter Kenny, is considering making a change.



Over the past few years, Peter has streamlined the production process and reduced … Read the rest

Activity Based Costing VS traditional costing.

Activity-based costing is a method of allocating overhead cost by allocating it basing on the activities which drive it rather than using an arbitrary allocation base as in the traditional costing.

The following are differences between activity-based costing (ABC) and the traditional system of assigning overhead to product

  • The traditional system uses a single rate while activity-based costing uses multiple
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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.… Read the rest

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Factors that led to the emergence of Activity Based Costing

Activity Based Costing is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each.

Activity Based Costing (ABC) was developed by Professors Cooper and Kaplan during the 1980 to address the
associated problems with the traditional system.

The main

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