Activity Based Costing Give your answers to the following questions; Why do product costing systems based on a single, volume based cost driver tend to overcost high volume products? What undesirable strategic effects can such distortion of product costs have? What is meant by activity analysis? Give 3 criteria for determining whether an activity adds value. What is meant by customer profitability analysis as it relates to activity based costing? Give an example of an activity that might be performed more commonly for one customer than another.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity Based Costing
Give your answers to the following questions;
- Why do product costing systems based on a single, volume based cost driver tend to overcost high volume products? What undesirable strategic effects can such distortion of product costs have?
- What is meant by activity analysis? Give 3 criteria for determining whether an activity adds value.
- What is meant by customer profitability analysis as it relates to activity based costing? Give an example of an activity that might be performed more commonly for one customer than another.
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