Please answer the two questions below:
-Explain how activity-based costing system is different from department-based costing system.
-In your opinion, what are the advantages/disadvantages of activity and department costing systems?
Explain how activity-based costing system is different from department-based costing system.
Department based costing systems takes costs within departments and allocates them typically on one cost driver (traditional method). Service departments are allocated to production departments based on a logical cost driver for that department. There are several methods to do this but the process is basically to allocate based on one cost driver.
Example: The costs of the cafeteria are allocated to production departments based on head count.
Activity-based costing systems take costs and sort them into homogeneous costing pools, where the costs in each ...
Response is 391 words with advantages and disadvantages in bullet format so you can put in your own words.