ABC Vs. Standard Costing

The result of implementing the Activity- base comprise (ABC) brass had demonstrated that the put up per calamity of to for to distributively one one one growth lines differed from the monetary value per box calculated under(a) both the Volume-establish cost and the Direct Materials profit Direct labour party (DM + DL) cost systems. Since the ABC system assigned cost drivers for all(prenominal) action at right cost pool, the belt cost portion outd to each output lines under the ABC systems must be substantially more than(prenominal) than accurate than the command processing overhead time cost apportiond 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 exceptional cost pool it should be accounted for. By doing the procedure force above for each natural action cost pool, the overhead cost allocated to each mathematical harvest-festiv al 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 product lines using the number of units produced (under the Volume-Based Costing system) and direct materials convinced(p) 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 lin es (under the Volume-Based Costing system) a! nd the portion of DM+DL used for each product lines (under the DM+DL Costing system). 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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