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Activity based costing

Need additional advantages and disadvantages and good reasonings why activity-based costing system should be used, and answers for below scenario.

Consider the following scenario: Two accountants are having a discussion about whether or not their company should use an activity-based costing system. create a list of 5 advantages or 5 disadvantages,

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Activity-Based Costing (ABC) is an accounting technique that allows an organization to determine the actual cost associated with each product and service produced by the organization without regard to the organizational structure. Activity- based costing can be used to identify discrete activities as well as identifying the primary output measure for each activity. With using activity-based costing there are value added-activities and non- value added-activities. Value added-activities are activities which customers are willing to pay for or show that after the process there will be a profit. Non- value activities are activities which customers are not willing to pay for or activities which do not show future profit. The activities must be analyzed in order to decide what will be a productive measure. When using activity-based costing an ...

Solution Summary

This discusses the advantages and disadvantages of activity based costing