The capital expenditure on the activity based system and its subsequent running costs can be a road block for firms. Data collection process for this system is very time consuming. This system aids in the process of benchmarking which is an integral part of he quality control system.ĭisadvantages of an Activity Based Costing System: This system mimics the actual business process as the appropriation of common pool resources takes place in the same way as common resources are used in the business. This process allows companies to implement costing strategies across another diagonal of the firm as business processes, supply chains and value addition channels are ably and optimally analyzed in this process. The system also works exceptionally with performance management systems which are employed by most human resource departments in contemporary businesses. This system is particularly helpful in identifying and ear-marking some of the matters business activities which are a burden or stress on the business i.e. The system works exceptionally well will quality improvement and up gradation programs e.g. This process uses unitary cost, or marginal cost as the computation base in contrast to the traditional cost accounting methods which employ total cost. ![]() The system is easy to understand and interpret is it is accessible, useable and practically implement able across all norms of business set-ups. the allocation of common business resources as they are used by specific product lines and their relation to specific cost driver. This system better assists in the process of understanding the concept of overhead costs i.e. The first and most important advantage is the accuracy in the process of costing with regards to the product line, the end-users of the product, the stock-keeping units employed by the management and the channel and category which streamline the flow of the product from the producer to the end user. The benefits and drawbacks are as follows:Īdvantages of an Activity Based Costing System: A large number of companies have converted to the ABC system since as far back as 1980 as the system has shown its usability in the appropriate product mix decision, overheads management etc. ![]() The paper has been formulated in order to determine the basic differences that are present between the activity based costing (ABC) and conventional methods of costing that are used around the world. 2.2 Advantages of an Activity Based Costing SystemĢ.3 Disadvantages of an Activity Based Costing SystemĢ.5 Advantages of Activity Based Costing: Case of CommQuestĢ.6 Implementing an Activity Based Costing SystemĬhapter 4: Data and Variables and FindingsĤ.1 Primary Research: Impressions of ABC in the IndustryĤ.2 Integrated ABC and Economic Value Added Systemsīibliography Chapter 1 – Introduction 1.1 Introduction
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