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Activity Based Costing System:

  1. Definition and Explanation of Activity Based Costing:

    Activity based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore "fixed cost". Click here to continue reading.
     

  2. Treatment of Costs Under Activity Based Costing (ABC) System:

    In traditional cost accounting system, only manufacturing costs are assigned  to products. Selling, general, and administrative expenses are treated as period costs and are not assigned to products. Click here to continue reading.
     

  3. Activity Based Costing and Top Management:

    Experts agree on several essential characteristics of any successful implementation of activity based costing. First, the initiative to implement activity based costing must be strongly supported by top level managers. Click here to continue reading.
     

  4. Activity Based Costing, GAAP and External Reports:

    Since activity based costing (ABC) system generally provides more accurate product costs than traditional costing methods, why isn't it used for external reports? Click here to continue reading.
     

  5. Designing and Implementing Activity Based Costing System:

    Experts agree on several essential characteristics of any successful implementation of activity based costing system. First, the initiative to implement activity based costing must be strongly supported by top management. Click here to continue reading.
     

  6. Targeting Process Improvements:

    Activity based costing can be used to identify areas that would benefit from process improvements. Indeed, managers often cite this as the major benefit of activity based costing. Click here to continue reading.
     

  7. Advantages, Disadvantages and Limitations of Activity Based Costing:

    Activity based costing system help managers manage overhead and understand profitability of products and customers and therefore is a powerful tool for decision making. However activity based costing has a number of limitations or disadvantages. Click here to continue reading.
     

  8. Activity Based Costing Example:

    Ferris Corporation makes a single product - a fire resistant commercial filing cabinet - that it sells to office furniture distributors. The company has a simple ABC system that it uses for internal decision making. Click here to continue reading.




 

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