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    How does ABC costing differ from traditional allocation meth

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    How does ABC costing differ from traditional allocation methods?

    What can an organization learn from the process of applying ABC costing?

    Some firms have a lot of fixed costs and few variable costs, while other firms are configured the other way around. What affect do you think the existence of a high proportion of fixed costs has on the desirability of using ABC methods?

    What are some of the characteristics of firms generally benefiting from ABC cost allocations?

    Is ABC just a method of allocating overhead costs? If not, discuss.

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    Solution Preview

    Q: How does ABC costing differ from traditional allocation methods?

    A: Activity based costing uses more than one cost driver to allocate overhead or common costs to products or divisions.

    Q: What can an organization learn from the process of applying ABC costing?

    A: ABC costing helps firms to figure out what the cost per activity is and this permits them to understand the true costs of using those resources (engaging in those activities such as driving a forklift for an hour) and analyze whether some of those activities ...

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