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Essay example - Assignment Ash plc produces components which it sells to the aircraft industry. Mr. Ash, the managing d

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Finance & Accounting
Pages 4 (1004 words)
ABC Costing system Name Institution Date An explanation of ABC costing system Activity Based Costing – ABC costing approach is a type of management accounting method that has greatly helped a lot of companies to improve on their cost structure and profitability…

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83). For you to be able to compete in the marketplace, management must change to the cost and profit management and the reporting approaches. Activity Based Costing is known as a management accounting approach that is able to allocate overhead (direct and indirect costs ) to cost objects (services and products) so that it can help management comprehend and understand critical business information. ABC is able to allocate direct and indirect costs to services and products based on the level of activities that have been used to create and deliver those products and services. Various activities such as design , purchasing, production, sales, customer service and marketing are utilized by different services and products (cost objects) with regard to their complexity and business requirements. If compared to traditional accounting, Activity Based costing is a decision making tool that provides more accurate results of cost and profit information thus allowing management to understand the cost and profit drivers so that you can improve your business. What the method is intended to do, a comparison with the traditional method The objective of the ABC costing system is to offer a better understanding of the overhead/ indirect cost and profitability. ...
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