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Activity Based Costing and Competing With a Pending Threat

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Assume you own a business that makes two complementary products for which you allocated manufacturing overhead proportionally. A competitor is trying to undercut your price for one of the products. How might activity based costing help you better compete with this pending threat?

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This response looks at competitive advantage and the effectiveness of activity based costing.

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How can Activity Based Costing help you compete with a pending threat?

Activity based costing is a rational approach to assign overhead cost to products. It is a more logical method than the traditional costing method. Adopting activity based costing will not only improve costing accuracy but also get you closer to the actual cost and true profitability (Schmidt, 2014). Activity based costing is quite detailed. It focuses on several activities, which assumes that various products utilize all these ...

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