Activity-based costing vs. Full-absorption costing: What direct comparisons can be made between the two systems? Which one is more widely used today? why?
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What direct comparisons can be made between the two systems?
Which one is more widely used today? why?
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Solution Summary
The expert examines activity-based costing versus full-absorption costing.
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ABC and FULL ABSORPTION COSTING---
Activity Based Costing (ABC) is an alternative to the traditional way of accounting. Traditionally it is believed that high volume customers are profitable customers, a loyal customer is also a profitable one, and profits will follow a happy customer. Studies on customer profitability have unveiled that the above is not necessarily true. ABC is a costing model that identifies the cost pools, or activity centers, in an organization and assigns costs to products and services (cost drivers) based on the number of events or transactions involved in the process of providing a product or service. As a result, Activity Based Costing can support managers to see how to maximize shareholder value and improve corporate ...
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