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