Purchase Solution

How does ABC costing differ from traditional allocation meth

Not what you're looking for?

Ask Custom Question

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.

Purchase this Solution
Solution Summary

Your tutorial is 242 words in everyday language explaining briefly the answers to each query.

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 ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Introduction to Finance

This quiz test introductory finance topics.

View More Free Quizzes
Related BrainMass Solutions

  • How does ABC costing differ from traditional allocation

    390267 How does ABC costing differ from traditional allocation methods? ABC Costing How does ABC costing differ from traditional allocation methods? What can an organization learn from the process of applying ABC costing?

  • ACTIVITY BASED COSTING VS TRADITIONAL COSTING

    211467 Subject is accounting: Activity Based Costing How does ABC costing differ from traditional allocation methods? What can an organization learn from the process of applying ABC costing?

  • Activity-based costing

    Avoids distortions in product costing that result from arbitrary allocations of indirect costs. F). Helps benchmark for improvements. How does this ABC differ from traditional costing systems?

  • ABC Costing; Examples from Manufacturing and Hospital Settings

    Since labor is certainly an "activity," they are having trouble understanding how their costing system would change. 1.Discuss the main differences between ABC costing systems and traditional overhead allocation systems.

  • Activity-Based Costing (ABC) and Traditional Costing

    479860 Activity-Based Costing (ABC) and Traditional Costing How would you describe activity based costing?

  • Activity-Based Costing, ABC

    Complex manufacturing processes may require multiple allocation bases; this approach is called Activity-Based Costing (ABC).

  • Activity Based Costing

    We would believe the ABC system since allocates costs based on the use of resources and so does a more accurate cost allocation as compared to traditional costing. The solution explains calculations under Activity Based Costing

  • Activity-Based Costing (ABC) and traditional two-stage method

    467243 Activity-Based Costing (ABC) and traditional two-stage method Explain the activity-based costing (ABC) and traditional two-stage method for cost allocation for overhead.

  • ABC Per-Unit Costing Versus Traditional Per-Unit Costing

    This solution illustrates how to compute a per-unit product cost under a traditional overhead allocation system and an ABC overhead allocation system, and how to use that information to determine whether or not to outsource a job.

View More Related Solutions