Benefits and Costs of Activity-Based Costing System Homework Help to Achieve Excellence
Activity-based costing system is an alternate option of absorption costing. This system has both advantages as well as disadvantages. Benefits and costs of activity-based costing system homework help go through this topic in detail.Before we go to the benefits and disadvantages of this system, we will briefly know about the activity-based costing (ABC) system.
What is Activity-based costing (ABC) system?
This accounting methodology identifies the tasks which an organization or firm performs and then to goods indirect costs are assigned. ABC system notices a relationship between activities, products, and costs. This then helps in assigning indirect cost to goods less promptly than traditional approach.
Certain costs are hard to assign using this approach of cost accounting. Indirect costs like salaries drawn by the office staff and management are many times hard to assign to one particular produced goods. This is why this methodology is mainly used in manufacturing sector of a company or business. Benefits and costs of activity-based costing system homework help explore this more to provide more information to students.
Advantages of this Method
Many advantages can be listed when this approach is used. Benefits and costs of activity-based costing system assignment help describe all the advantages.Some are given below:
- Indirect cost is based on this system on a goods’ cost driver. Either this or on factor which creates cost. Since costs are assigned per product, it becomes clear that which processes in the business are working properly and which needs improvement. It can be also used to recognize activities of no value, and that helps using resources efficiently. This way it helps in improving business processes.
- This method explains costs the same way production is performed. It helps a business to know where cost of overheads is going in a better way. Since the data received from this method identifies wasted products and costs, it helps using these resources in a proper way. Not only this approach helps in fixing price of services or goods which might be incorrect or excess in nature.
- Other than this it provides accurate information and is applicable to all overhead costing.
Though there so many advantages to this approach, there are certain disadvantages too:
- Implementation of this system is excessive.
- Accounting record is not appropriate, and data is misinterpreted certain times
- Hard finding the correct drivers all the time
- Many still fail to understand this method correctly
Benefits and costs of activity-based costing system assignment help present the disadvantages in detail for creating a better assignment.
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