Are you doing the Activity Based Costing Assignment then you need to know what activity-based costing is? It is an accounting method that is used to identify the activities that a firm has to perform. It recognizes the relationship between the costs, activities and the products. If you need any help regarding the Activity Based Costing Assignment, then we will surely help you with the best possible Activity Based Costing Assignment Help.
Activity Based Costing
To run any organization successfully and smoothly. The company needs to perform various activities such as purchasing of raw material, installation of machinery, production of goods, packing, selling and advertisement. It identifies the activities and assigns the indirect cost to the products.
The ABC method help to recognize the relationship between the cost, activities and the products. This method is mainly used in manufacturing industries as it helps to enhance the reliability of the cost data. It is used as a tool to understand product and customer cost. It also helps in strategic decision making such as pricing, outsourcing, and identification. If the cost is not classified correctly, then this method is not useful. The activity-based costing method provides more accurate results in cost determination. The various steps involved in Activity-based costing method are:
- Step 1 Determining the cost of the objects (such as A, B, C)
Step 2 Identification of the direct cost (such as direct material, labor, expenses)
- Step 3 Finalize the base for cost allocation which uses for overhead costs
- Step 4 Determining the overhead cost which is related to the selected overhead base
- Step 5 Calculate the per unit cost
- Step 6 Compute the overhead costs for the allocation of the product
- Step 7 Lastly calculate the cost of the products
Our Activity Based Costing Essay will make you aware of areas where the activity-based costing methods can use. It can be used in stiff competition, customer diversity, product, and service diversity as well. If you want to make your Activity-based costing assignment more effective, then our experts will ensure you best Activity Based Costing Assignment Help.
Importance of Activity-Based Costing method
- Better allocation of resources: With the help of ABC method, the manufacturer can use their resources efficiently.
- Improve business operations: The ABC method used by industries can help them to improve their business operations.
- Helps in better decision making: This method also helps the manager to take various decisions for company betterment.
- Accuracy and reliability of cost determination: This method helps the manager to bring a complete accuracy and reliability to calculate the cost of the product.
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Detailed Information About the topic
As above discussed the importance of ABC approach. There are few other importance of ABC method which is as follows. This method helps to identify and remove those goods and services that are not profitable for the growth and development of the organization.
- It helps the top management to take timely decision for the betterment of the industry.
- The ABC method also helps to identify the available resources in a better way.
The ABC method divides the cost into three main cost such as fixed cost, variable cost and the overhead cost that will help in better understanding. Some limitations should keep in mind be while making Activity Based Costing Thesis which are as following:
- The activity-based costing method is not easy to install as it incurs a high cost.
- The ABC method is also much time consuming so that it will become one of most important limitation.
- The ABC method will not be valid if not appropriately classified.
- This method is not useful for the organization where the costs do not vary. It is not suitable for the small business organization.
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