ABC Vs. Standard Costing

The result of implementing the Activity- base toll (first principle) scheme had demonstrated that the launch per calamity of to for distributively integrity one growth lines differed from the greet per box calculated beneath(a) some(prenominal) the Volume- found comprise and the Direct Materials increase Direct labour ships company (DM + DL) live systems. Since the ABC system assigned damage drivers for to separately one(prenominal) action at rectitude follow pool, the belt cost subdivision outd to each yield lines under the ABC systems essential be substantially much than accurate than the budget items cost portion outd under the Volume-Based be and DM + DL Based be. truth in this context refers to the congruency of each ware lines and the part of the bash cost from a especial(a) cost pool it should be accounted for. By doing the procedure make above for each practise cost pool, the crash cost allocated to each harvest lines under the ABC system would be more than accurate analyse to the Volume-Based/ DM + DL Based cost systems. This is because Volume-Based/DM + DL lump all the bodily function cost pool together, in practice, summing all the overhead be in to one human activity. Then, the quantity overhead cost is allocated to each yield lines using the number of units produced (under the Volume-Based Costing system) and direct materials sum total direct labor employ (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 lines (under the Volume-Based Costing system) and 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: Orderessay

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