The name depicts itself that activity based costing is an accounting strategy that recognizes the activities performed by a firm and afterward indirect cost is appointed to the products.
An activity based costing methodology perceives the connection between costs of activities performed and the products, and as per this relationship, it allocates indirect costs to products less discretionarily than traditional techniques.
Activity based costing so far is comparatively more convincing way as it assigns the overheads rather than just distributing costs which are based on working hours on machine and cost of labor straightly. Confusing a concept, is it? A glimpse through activity based costing system homework answers will help you garner details on this subject.
Activity based costing or ABC is quite an impressive technique because it deals with allocating and regulating the cost of overheads and from management’s point of view, ABC is an extremely productive approach. If you want to evaluate the overheads cost more precisely, then ABC methods can definitely help you out.
How activity based costing approach executes?
Some major steps involved Activity based approach are listed below.
- There are multiple departments in an organization dealing with various activities. So, in reference to ABC approach, these departments and functions are classified into individual activities e.g. activities related to HR departments like recruitment and financial activities comes under accounts and finance department.
- ABC approach incorporates first categorizing each and every activity which includes the production process.
- Then next step incorporates the classification of activities as per cost division which can be entry level or product level or office level.
- Now comes determining and collecting the total expenses of each and every activity included.
- Then the most crucial step, that includes determining the relevant cost driver for every activity performed.
- Figuring the aggregate units of cost drivers which are applied to each and every
- Then finally figuring out the activity rate which implies each activity’s expense per unit of the applicable cost driver.
What difficulties can you face in activity based costing system homework answers?
Although activity-based costing system is not that troublesome topic in accounting, the basic pre-requisite is that you should be clear about all aspects of activity-based costing system. Some major obstacles one can face in completing the activity based costing system homework answers are listed as.
- Lack of practical exposure
The first and foremost factor is the lack of understating of the realistic concepts and circumstances. Theoretical or bookish knowledge is definitely not enough to understand the contagious concepts of activity-based costing system. As a student, it is supposed that one must not be having a practical exposure, which can cause hindrance in completing your ABC homework effectively.
- Deciding about the allocation
Analyzing the actual factors on the basis of which activity cost should be assigned is extremely important. Students must be well versed with this particular topic that how the allotment should be done according to the activities performed by a firm and which needs a lot of hand in practice.
- Lengthy and tiresome calculations
The next trouble you can face in completing your activity based costing system homework answers can be that tedious and exhausting calculations that have to be done. The allocation computations can be excessively difficult and extend which consequently will reinforce you to opt for homework help online.
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