In traditional costing, direct material, direct labour and direct expenses are identified with the jobs and all other expenses are accumulated under the head “overheads” and are charged to the jobs on the basis of one or two measurements such as direct labour cost or direct material cost of the jobs.
Proponents of activity based costing first brought out the fact that product costs derived by using traditional costing techniques are giving wrong information. The actual product cost of certain jobs is high but traditional costing system is reporting a low cost for them. If the selling price is determined on the basis of such wrong low cost, at the end of the year, companies find that they have not earned the anticipated profits.
In activity based costing, all the costs which are classified as overheads in traditional costing system are accumulated under various activities which are carried out in the organization. From the activity cost for a period, and the number of times the activity is carried out in the period, cost for doing the activity once is ascertained. Then an account is maintained each time the activity is carried and the job responsible for performing the activity is recorded. Therefore the activity cost can be charged to the job.
Thus the job cost, now comprises of direct material cost, direct labour costs, direct expenses and costs of each of the activities consumed by the job.
Activity based costing provides a more realistic estimate of costs of products.
Normally compared to traditional costing system, ABC system provides lower cost figures for standard products and higher cost figures for nonstandard orders.
Friday, May 30, 2008
Management Concepts List - A
Accounting
Accounting controls
Activity based costing
http://kvssnrao-smis.blogspot.com/2008/05/activity-based-costing-abc.html
Activity based management
Attitude measurement
Administration
Activity sampling
Audit
Accounting controls
Activity based costing
http://kvssnrao-smis.blogspot.com/2008/05/activity-based-costing-abc.html
Activity based management
Attitude measurement
Administration
Activity sampling
Audit
Management Concepts List
Balance sheet
Brand
Branding
Brand name
Brand equity
Brand ambassador
Board
Budget
Budgeting
Brand
Branding
Brand name
Brand equity
Brand ambassador
Board
Budget
Budgeting
Management Concepts List - C
Capital
Case study
Client
Competitive advantage
Costing
Cost control
Cost accounting
Cost of capital
Corporate governance
CPM (Critical path method)
Credit and collections
Cross selling
Customer
Customer account profitability analysis
Customer delight
Customer loyalty
Customer service
Case study
Client
Competitive advantage
Costing
Cost control
Cost accounting
Cost of capital
Corporate governance
CPM (Critical path method)
Credit and collections
Cross selling
Customer
Customer account profitability analysis
Customer delight
Customer loyalty
Customer service
Management Concepts List - E
Effectiveness
Efficiency
Engineering economics
Enterprise resource planning
Enterprise risk management
Entrepreneur
Entrepreneurship
Empathy
Equity
Equity share capital
Efficiency
Engineering economics
Enterprise resource planning
Enterprise risk management
Entrepreneur
Entrepreneurship
Empathy
Equity
Equity share capital
Management Concepts List - H
House of quality
Human effort engineering
Human resource development
Human resource management
Human effort engineering
Human resource development
Human resource management
Management Concepts List - I
Image
Industrial engineering
http://kvssnrao-smis.blogspot.com/2008/06/industrial-engineering.html
Industry analysis
Integrity
Internal rate of return
Intrapreneur
Interest
Inventory control
Industrial engineering
http://kvssnrao-smis.blogspot.com/2008/06/industrial-engineering.html
Industry analysis
Integrity
Internal rate of return
Intrapreneur
Interest
Inventory control
Management Concepts List - L
Leader
Leadership
Leading
Ledger
Learning
Learning curve
Linear programming
Liquidity
Leadership
Leading
Ledger
Learning
Learning curve
Linear programming
Liquidity
Management Concepts List - M
Maintenance management
Management
Management of change
Management accouting
Management control
Manufacturing
Marketing
http://kvssnrao-smis.blogspot.com/2008/06/marketing.html
Mission
Monetary policy
Motivation
Management
Management of change
Management accouting
Management control
Manufacturing
Marketing
http://kvssnrao-smis.blogspot.com/2008/06/marketing.html
Mission
Monetary policy
Motivation
Management Concepts List - O
Objectives of the organization
Operations research
Option
Overhead
Organization structure
Operations research
Option
Overhead
Organization structure
Management Concepts List - P
Perception
Performance appraisal
PERT
Planning
Policy
Process control
Process map
Process mapping
Procedure
Program
Production management
Production planning and control
Productivity
Project management
Profit
Purchase management
Purpose of business
Performance appraisal
PERT
Planning
Policy
Process control
Process map
Process mapping
Procedure
Program
Production management
Production planning and control
Productivity
Project management
Profit
Purchase management
Purpose of business
Management Concepts List
Salesmanship
Sales management
Selection
Staffing
Statistical quality control
Strategy
Stores management
Sales management
Selection
Staffing
Statistical quality control
Strategy
Stores management
Management Concepts List - T
Team building and management
http://kvssnrao-smis.blogspot.com/2008/06/team-building-and-management.html
Technology management
Theory of constraints
Theory X
Theory Y
Theory Z
Time standard
Time study
Training
Trust
Total productive maintenance
Total quality management
http://kvssnrao-smis.blogspot.com/2008/06/team-building-and-management.html
Technology management
Theory of constraints
Theory X
Theory Y
Theory Z
Time standard
Time study
Training
Trust
Total productive maintenance
Total quality management
Subscribe to:
Posts (Atom)