Difference Between Activity Based Costing (abc) and Traditional Cost Accounting (tca)
Autor: jon • April 9, 2011 • Case Study • 1,731 Words (7 Pages) • 1,880 Views
Topic: Activity Based Costing
Submission Date: 16 march 2011
Word Count: 1770
Name: Mary Moss
Student No: L00084540
Class: Buss Yr 2
Contents
Page 2 …………………………………….. Introduction to Activity Based Costing
Page 2…………………………………….. Benefits of ABC
Page 3…………………………………….. Traditional Cost Accounting (TCA)
Page 4…………………………………….. Difference between ABC and TCA
Page 5…………………………………….. Numerical example using ABC and TCA
Page 8…………………………………….. Bibliography
Introduction to Activity Based Costing
Activity Based Costing (ABC) emerged in the 1980s from the rising lack of relevance of traditional cost accounting methods. It took just a short time for ABC to be accepted as an original and potentially valuable costing methodology, yet it took a further 20 years to reach its full potential. ABC surfaced in response to competitive demands that exposed errors in cost accounting. Early uses helped companies see the deformities in cost accounting systems leading to changes in policy, processes, operations and improved competitive position. The ABC method originates from a simple principle, this being, ‘activities consume resources and customers consume activities'. It is a method of allocating costs to products and services and is commonly used as a tool for planning and control. It was developed as an approach to tackle problems that were related with traditional cost management systems, as this system inclines to have the lack of ability to precisely determine actual production and service costs, or supply useful information for operating decisions. With these deficiencies managers can be exposed to making choices based on imprecise data. ABC permits managers to assign costs to activities and products more precisely than traditional cost accounting methods allowed for
Benefits of ABC
This
...