Cost Accounting Discusion board 4

Cost Accounting Discusion board 4

Activity-based costing (ABC) is not truly a cost collection mechanism as much as it is an inventory valuation method. The main purpose for implementing an activity-based cost system is to try to overcome some of the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. However, one of the disadvantages of utilizing ABC is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with resource or financial constraints.

With this in mind, what kinds of industries or companies do you think would benefit most from using activity-based costing and why? In designing or modifying an accounting system to capture appropriate costs for ABC, what considerations do you think would need to be made?

Your initial posting should be 250-500 words

Solution Preview

In business to maintain productivity and profit margin, the management must ensure that principles related to profit-making are adhered to in order to maintain profit margin and keep the business afloat despite the challenging moments. In production cost of production is a determining factor on the value cost of a product. In this case, we are going to focus on activity-based accounting.

In activity-based accounting method of accounting determine the cost of activities incurred in the production and the assigns those cost to the product that caused those activities to occur.

(344 words)