Best Considerations in Implementing Activity-Based Costing Systems Homework Help from Myhomeworkhelp.com
Activity-Based Costing (ABC) System is another option for Absorption system and when implemented many benefits as well as drawback can be observed. Here we will discuss that and how Considerations in implementing activity-based costing systems assignment help in a proper way to know that. So first let’s just see what is activity-based costing system is exactly. Then we will proceed from there to the implementation process and then some benefits and drawbacks of it.
Activity-Based Costing System
This system is a costing method which recognizes activities or tasks in a business organization and allots cost of each task with resources to services and goods according to each one’s actual consumption. This system allots overhead of indirect cost into direct cost when compared to traditional system. Considerations in implementing activity-based costing systems assignment help is a proper way to get everything which is needed in order to complete this topic.
Implementation of this System
In six easy steps, it can be implemented. In brief, some steps are given below.
- Identifying Activity or Task
First, all the activities or task should be identified and then put together in task or activity pools.These pools include allotted to supporting activities’ cost to single unit of products.
- Analysis of Activity
The analysis of the activities keeps going on. This identifies all processes which support goods and at the same time avoids some inaccuracies of conventional system. This analysis identifies relationships of indirect cost.
- Allotted Costs
Costs are allotted to a task or activity pool. Like indirect management or administrative cost will undertake human resource cost. These will have a contribution to product cost.
- Activity Rates Calculation
This analysis includes direct or indirect labor hour. These tasks should be allotted in real currency value.
Other than this there are two more steps involved in implementing this system which is available in detail in our considerations in implementing activity-based costing systems homework help.
Benefits and Drawbacks of this System
If we start with listing benefits then the first one would be:
- Improvement of business processes.
- It is more accurate
- Wasteful products are identified easily
- Helps in getting insight as to what exactly drives cost of overhead
Some drawbacks of this system:
- Implementing it is expensive
- Data misinterpretation
- Finding right cost drivers is difficult
- Not every manager knows how to use this costing system properly so must be used carefully
For more info check our considerations in implementing activity-based costing systems homework help.
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