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Activity-Based Costing: Is It Still Relevant? - Essay Example
Author : casperamy
Finance & Accounting
Pages 11 (2761 words)
The main purpose of this research has been to identify whether activity based costing method is still relevant in today’s world and whether it is better than other costing methods that have been used by organisations around the world…
This paper analyses important benefits and analyses how activity costing method can be helpful for organisations in their decision making processes, in analysing the profitability of a customer or a product, in improving costing processes and in tracing the cost in a better way. Therefore this article has been helpful in highlighting the important benefits of activity based costing as well as it has been helpful in determining the main benefits of activity based costing method and how people in the organisation feel about this costing system. Though, the questions asked from the respondents have been only related to the benefits of activity based costing and different questions related should have also been asked like frustration of an individual doing activity based costing, or time consumed or taken by an individual or the cost of such method as these questions would have been helpful in determining both the advantages and disadvantages of the costing system. Activity based cost is very helpful in analysing the profitability of a customer or a product. In addition to this, this costing system alleviates the concerns of managers about cost allocation. As the other costing system lacks to address accurate overhead allocation therefore activity based costing has been helpful in this regard. However, it is important for the management of the organisation to compare the advantages and disadvantages of activity based costing before implementing the system in the organisation as the process is time consuming, complex, expensive and can deviate the focus of the management from profit maximisation to cost minimisation. ...