Abc Costing

14 Pages 3609 Words

In order to adapt to new standards and practices, which are constantly occurring in business activity? The demand for effective methods and systems of accounting for activity within an organization is always growing, therefore, it makes sense that companies would want to implement practices which will benefit the structure and performance of their organization. This was the case in regards to the evolution of the concept known as activity based costing, or ABC. In order for management to know the basis behind this costing system, which appeared on the scene during the 1980’s, they must first become familiarized with the general concept of ABC compared to a traditional costing system. Once a solid base has been established, it allows the opportunity for management to go beyond the surface of the topic and explore into the added value of what it has to offer. The topics, which are of interest to this particular costing system, may not be available to many firms, let alone university students. For this reason, light will be shed upon how ABC is actually implemented and just what is important for its success will be highlighted as well. Also, common myths and misconceptions about the topic must be addressed in order to clear up any ambiguity one may have about the subject. These are vital for the reasoning behind firms deciding for or against implement this system in their operations. It is essential that the necessary qualities, as well as obstacles, which are to be required or overcome in order to establish the ABC system, be clearly known to management before they implement a system which may make or break their operations. It should provide an in depth interpretation to any individual, student or manager, as to what ABC actually entails beyond a trivial extent.
In the past, companies were dependent upon traditional cost accounting methods in order to predict and allocate manufacturing costs amongst units in production. ...