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ACC2-Management AccountingAssignment 1 |
Essay - Discuss the relative advantages and disadvantages of traditional absorption costing techniques (absorbing indirect costs on a labour hour basis), and activity bad costing |
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Contents
1.Introduction …………………………………………………...…..
2.Absorption costing …………………….…………………….……..…
2.1 Definition ……………………………………………….…..
2.2 Background …………………………………………………..
2.3 Approach ………………………………………………….….
3.Activities bad costing (ABC) ……………………………………...
3.1 Definition …………………………………………………...
3.2 Background …………………………………………………...
3.3 Approach …………………………………………………..
4.The different between traditional absorption costing and ABC …...
4.1 Allocation, apportionment and absorptions rate …………..
描写春天的诗句古诗4.2 Approach ………………………………………………..….
4.3 Methodology …………………………………………...…..
4.4 Legal validity ……………………………………………….
4.5 Range ………………………………………………….…….
4.6 Advantages of absorption costing ……………………..…..
4.7 Disadvantages of absorption costing …………………..……
人民银行征信报告4.8 Advantages of ABC …………………………………..….….
4.9 工作方案格式模板范文Disadvantages of ABC ………………………………….…...
5.Conclusion ……………………………………………………………早孕出血正常吗
6.References …………………………………………………………….
7.Bibliography ………………………………………………………..
1.Introduction
No matter tradition absorption costing or Activities bad costing, they both are important component for companies becau the are the management methods for accounting to calculate the costs, which can let the companies know the operating costs of the business. Generally speaking, both of them are u to trace indirect cost to cost object becau not all overheads can be charged to cost object directly. This essay is going to describe the advantages and disadvantages of traditional absorption costing and activities basis costing (ABC). It will be parated three parts, the first part is the information about traditional absorption costing and ABC, which included the definition, background, and working process.; the cond part is the difference between traditional absorption costing and ABC, which shows the advantages and disadvantages for the costing technique, compare with each other, and give the reasons for how suitable for tho companies; and the final part is conclusion of this article.
2.Absorption costing
2.1Definition
五行风水Kilgour (2005) stated that, ‘In absorption costing, all production costs are absorbed into products and the unsold stock is valued at total cost of production.’ It means the units produced absorbed all of the manufacturing costs, which include direct materials, direct labour, and both variable and fixed manufacturing overhead. In addition, the traditional costing system is charged indirect cost bad on labour hour. Therefore the company need to u them to analysis the costs and give the information for guidance of management, which the usage of absorption costing is for cost control purpo.
2.2Background
Obviously since the early 1900s, traditional costing systems have been developed which was charged the overhead to product by using basic apportionment and now are still widely ud. Although some accountants say ABC is better, it depends on the type of company.
2.3Approach
The working process of Absorption costing, firstly, to charge all manufacturing overheard to production and rvice cost centre; condly, to reallocate the rvice cost centre to production cost centre; thirdly, to calculate the overhead rate for each production cost centre; At last, put the cost overhead to product.
3.Activities bad costing (ABC)
3.1Definition
Kilgour (2005) stated that, ‘Activity bad costing (ABC) is a method of costing which identifies the factors which cau costs and charges costs to output bad on the usage of tho factors.’ In other word, it charges indirect costs of all the activities to cost object accurately, for example, manufacturing, engineering or planning. In addition, ABC gives helpful data to managers so that they can follow the figures which show the profitable or unprofitable of the business activities in decision-making for the company.
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3.2Background
ABC was developed in the late 1980s, actually it was not focud when it implemented although it tried to instead of the traditional costing system. However, now is more and more companies u this method becau the world has changed, for instance, larger and larger numbers of business, product ranges, production technology and practice, more support activities and so on.
3.3Approach
The working process of ABC, at first it needs to confirm the major activities; condly, identify influence cost level (cost drivers ); thirdly, check through costs on basis of cost drivers (cost pools); fourthly, calculate cost per unit of cost driver and finally charge costs to product which bad on cost driver ud.
4.The different between traditional absorption costing and ABC
4.1Allocation, apportionment and absorptions rate
