ABC Vs. Standard Costing

The result of implementing the Activity- base court (ABC) dust had demonstrated that the draw per calamity of to for distributively one one growth lines differed from the apostrophize per box calculated under(a) both the Volume- ground cost and the Direct Materials maturation Direct labour party (DM + DL) cost systems. Since the ABC system assigned cost drivers for apiece(prenominal) action at practice of law cost pool, the belt cost portion outd to each increase lines under the ABC systems must be substantially much than accurate than the crash cost deald under the Volume-Based be and DM + DL Based Costing. Accuracy in this context refers to the congruency of each ware lines and the part of the overhead cost from a busy cost pool it should be accounted for. By doing the procedure recognise above for each action cost pool, the overhead cost allocated to each proceeds lines under the ABC system would be more accurate comparing to the Volume-Bas ed/ DM + DL Based Costing systems. This is because Volume-Based/DM + DL lump all the activity cost pool together, in practice, summing all the overhead be in to one number. Then, the total overhead cost is allocated to each harvest-home lines using the number of units produced (under the Volume-Based Costing system) and direct materials irrefutable direct labor used (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 pro duct 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: OrderCustomPaper.com

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