Re: help! activity based costing

Discussion in 'Accounting' started by Sarah Berel-Harrop, Aug 10, 2003.

  1. "Latenitejazz" <> wrote in message
    news:...
    > Can anyone explain in very simple terms what Activity Based Costing (ABC)

    is
    > and how is differs from Absorption Costing. I really need some help on

    this and
    > a jargon free explaination would be great.


    You kind of have apples and oranges here, ABC
    and absorption costing can both be present.

    In Absorption Costing, as opposed to Variable Costing,
    the fixed portion of overhead is allocated to inventory
    and CGS as opposed to appearing in full as a current
    period expense.

    Variable costing is not GAAP, and it is not acceptable
    for tax purposes, so the only time you would see it
    is in internal reporting.

    Barfield et. al's Cost Accounting has a pretty good
    discussion of this, with some exercises in which you
    construct P & L's under Variable and Absorption
    Costing. Doing a few of those is the best way to
    soldify understanding.

    ABC is a method of overhead allocation that
    separates costs into multiple pools and assigns
    the costs to products using a predetermined
    rate based upon cost drivers.

    For example, you might allocate QC costs
    based on the number of runs or batches. This
    is as opposed to allocation methods that simply
    allocate all costs based using a predetermined
    rate per unit. ABC should give you more accurate
    costing data.


    >
    > Also if anyone knows anywhere on the Net that I can get additional info

    from
    > the web address would be brilliant
    >
    > Thanks
    >
    > Latenitejazz



    ---
    Outgoing mail is certified Virus Free.
    Checked by AVG anti-virus system (http://www.grisoft.com).
    Version: 6.0.505 / Virus Database: 302 - Release Date: 07/30/2003
     
    Sarah Berel-Harrop, Aug 10, 2003
    #1
    1. Advertisements

  2. Sarah Berel-Harrop

    QBslave

    Joined:
    Nov 29, 2014
    Messages:
    14
    Likes Received:
    0
    Location:
    San Diego
    ABC can be used as an internal management tool, or for determining revenue. It can be used solely for budgeting, costing, or management. Read: "Relevance Lost" by H. Thomas Johnson, with Cooper and Kaplan, Harvard Business School. ABC is a method of allocating ALL costs and expenses to activities, regardless of whether it is direct or indirect. The term Overhead doesn't exist in an ABC system. That's turn of the century stuff.
     
    QBslave, Jan 6, 2016
    #2
    1. Advertisements

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.
Similar Threads
  1. News videotron

    Activity-Based Costing

    News videotron, Feb 7, 2004, in forum: UK Accountancy
    Replies:
    1
    Views:
    630
    Troy Steadman
    Feb 8, 2004
  2. Janice Davis

    Re: help! activity based costing

    Janice Davis, Aug 10, 2003, in forum: Accounting
    Replies:
    0
    Views:
    690
    Janice Davis
    Aug 10, 2003
  3. Sarah Berel-Harrop
    Replies:
    4
    Views:
    1,174
    Ben V
    Aug 18, 2003
  4. Jim

    Activity Based Costing

    Jim, Sep 13, 2003, in forum: Accounting
    Replies:
    3
    Views:
    1,625
    QBslave
    Jan 6, 2016
  5. Randy Holndoner

    Activity Based Costing Customer Ranking

    Randy Holndoner, Sep 23, 2003, in forum: Accounting
    Replies:
    4
    Views:
    674
    Rich C
    Sep 24, 2003
  6. News videotron

    Activity-Based Costing

    News videotron, Feb 7, 2004, in forum: Accounting
    Replies:
    0
    Views:
    432
    News videotron
    Feb 7, 2004
  7. Jacob Mortensen

    Activity based costing!

    Jacob Mortensen, May 20, 2004, in forum: Accounting
    Replies:
    1
    Views:
    425
    Richard A. Bilancia
    May 22, 2004
  8. Tbrommen

    Activity Based Costing help.

    Tbrommen, Mar 8, 2013, in forum: Exams and Studying
    Replies:
    5
    Views:
    2,410
    QBslave
    Jan 6, 2016
Loading...