ABC Vs. Standard Costing

The result of implementing the Activity- base price (ABC) ashes had demonstrated that the live per calamity of to for separately one one growth lines differed from the damage per box calculated under(a) both the Volume- base cost and the Direct Materials join on Direct labour party (DM + DL) cost systems. Since the ABC system assigned cost drivers for separately action at equity cost pool, the belt cost portion outd to to each one harvest-time lines under the ABC systems must be substantially more(prenominal) than than accurate than the smash cost shared under the Volume-Based be and DM + DL Based Costing. Accuracy in this context refers to the congruency of each ware lines and the part of the overhead cost from a particular cost pool it should be accounted for. By doing the procedure follow above for each use cost pool, the overhead cost allocated to each reaping lines under the ABC system would be more accurate comparing to the Volume-Based / DM + DL Based Costing systems. This is because Volume-Based/DM + DL lump all the activity cost pool together, in practice, summing all the overhead be in to one number. Then, the total overhead cost is allocated to each intersection lines using the number of units produced (under the Volume-Based Costing system) and direct materials nonnegative direct labor used (under the DM+DL Costing system).

The portion of the total overhead cost allocated to each product lines is proportionate by the portion of units produced for each product lines (under the Volume-Based Costing system) and the portion of DM+DL used for e ach product lines (under the DM+DL Costing s! ystem). The overhead costs allocated for each product lines under the Volume-Based Costing system and the DM+DL Costing system wouldnt reflect the real overhead costs incurred by each product lines. Fortunately, this problems solved with the invention of the ABC system. ABC system could allocate overhead costs to each product lines more accurately because of the use of multiple cost pools. Furthermore, assigning a more accurate...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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