Write a 6 page essay on ACCOUNTING AND FINANCE.
Activity based costing is loved for its ability to enable the cost control team to enhance accuracy. Accuracy here is in terms of closeness to the actual cost and actual profitability of each product and service. ABC helps managers to have a better comprehension of the companys actual costs as well as its returns on investments. The returns on investments are usually computed by considering the number of projects and activities that the business engages in. Accounting for costs (2010) show that ABC improves the accuracy levels through transforming some of the costs that traditional costing techniques deem not to be direct into direct costs. The process is done as follows.
Firms that have applied ABC successfully did so by employing a number of strategic costing and management factors. The management of such firms does ensure they support and participate in every pricing decision. They have to know when to add or delete items from the product portfolio. Finally, they must know when to consider outsourcing or producing the product in-house (Plowman 2011, p.43). While performing all these, the management is always cautious about improving all the process initiatives.
Activity Based Costing (ABC) is an organized style of passing on indirect costs to goods and services. It entails obtaining the cost of each activity drawn in the process of production and assigning costs to each product according to the use of each activity. Alternatively, activity-based costing (ABC) is a more refined way of costing goods and services. Activity based management is the application of ABC as a technique of managing costs at the activity level. It is an area that involves ensuring effective and efficient control f activities as to promote the product value and customer satisfaction. Activity Based Management makes use of the information obtained
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