Management Accounting

Traditional rule & legal action ground exist Yes, Managers, consultants and academics principally accept superiority of activity based be over traditional systems. While many alphabet victor stories give way been recognized, a large number of implementations smash to produce overt benefits. This essay will go through true facts of an ABC implementation over the traditional method, with appraise to the pros and cons. The traditional method of cost accounting refers to the allocation of manufacturing overheads cost to the products manufactured, this method assigns or allocates the factorys in direct costs to the items manufactured on the basis of volume such(prenominal) as the number if units produced, the direct labor hours or the turnout machine hours. Traditionally that whitethorn have been sufficient for the federations external fiscal didacticss. However, in the last two decades the manufacturing overheads has been driven or caused by many other fact ors. For example, most customers are likely to exact additional manufacturing operations for their contrastive products. Other customers simply urgency many quantities of uniform products. Alternatively, (Garrison, R.

, 2010) Activity based be is a costing method that is designed to provide managers with cost training for strategic and other decisions that potentially affect capacity and hence Fixed as salutary as variable costs. In terms if strategic decisions, organizations may drop unprofitable products, bid prices on other, and in virtually cases even discounted relationships with clientele. Therefore (Kaplan, 2006) argues that if manufacturers inadequacy to know the tr ue cost to produce specific products for cer! tain customers, than they must recognize the shortcomings that occur with the implementation of the traditional costing method. Thus, Kaplan encourages companies to implement the Activity Based Costing. The reason behind this statement is that, while standard costing system is easily to empathise and...If you want to get a full essay, order it on our website: OrderEssay.net

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