Purchase Solution

Activity-Based Costing Provides More Accurate Product Costs

Not what you're looking for?

Ask Custom Question

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

Purchase this Solution
Solution Summary

The solution explains how activity-based costing systems can provide more accurate product costs than traditional cost systems.

Solution Preview

Meaning of ABC
Activity based costing allocates the cost to the cost driver on the basis of activity rate. ABC method and to compute a cost driver rate. It involves following steps:
1) Assign costs to pools according to activities that cause costs to be incurred.
2) Allocate costs in the activity pools to products.
Where the Formulae ...

Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • Alpha Manufacturing and Activity Based Costing

    By allocating overhead to activities that the product consumed, activity based costing provides managers with accurate cost of products and financial information.

  • Accuracy of ABC Systems and Traditional Costing Systems

    Therefore, activity based costing is always more accurate than the traditional costing system.

  • The advantages and disadvantages of activity-based costing

    The advantages of the step-down activity-based costing method include a more accurate product costing relative to traditional allocation methods, resulting in more accurate pricing and profit reporting.

  • ACTIVITY BASED COSTING VS TRADITIONAL COSTING

    to be allocated more accurately to the different customers and products.I achieve this accurate allocation of costs, Activity based Costing can also be used in Financial Institutions and Banks.ABC costing can be used by all organizations to rank the

  • A Discussion on Product Costing

    By allocating overhead to activities that the product consumed, activity based costing provides managers with an accurate cost of products and financial information.

  • Product and Activity Based Costing: Two Activity Example

    407307 Product and Activity Based Costing: Two Activity Example Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours

  • Activity Based Costing Allocation

    420450 Managerial accounting Allocation of support center costs is an important topic for product costing. In recent years, the issue of accurate product costing has assumed considerable importance.

  • Overhead allocation

    Whether to adopt ABC or not depends on the individual circumstances.Activity-based costing provides a more accurate allocation of overhead costs. However, the more accurate method is also more expensive.

  • Activity-Based Costing (ABC) and Traditional Costing

    On the other hand Activity-based costing (ABC) is a more accurate method of allocating indirect costs to specific products as ABC focuses on the cost driver.

View More Related Solutions