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Cost Accounting

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2. With the seeming multitude of cost classifications, how does an organization precisely identify which costs belong where? How does an organization determine how costs behave? Consider payroll costs?what really drives them? Are there different drivers for different employees?

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With the seeming multitude of cost classifications, how does an organization precisely identify which costs belong where? How does an organization determine how costs behave? Consider payroll costs?what really drives them? Are there different drivers for different employees?

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With the multitude of cost classifications, how does an organization precisely identify which costs belong where? How does an organization determine how costs behave? Consider payroll costs?what really drives them? Are there different drivers for different employees?

One of the ways to precisely allocate costs to products and services is by adopting activity based costing. Activity based costing is an accounting methodology that assigns costs to activities rather than products or services. This enables resource and overhead costs to be more accurately assigned to the products and the services that consume them. Traditional accounting systems are inaccurate in the way that they allocate costs. Large batch or high volume products and services typically incur 50-200% LESS overhead than they are assigned. Small batch ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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