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discssio 2 week 4 - Traditional costing assigns...

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Traditional costing assigns manufacturing overhead based on the volume of a cost driver, such as theamount of direct labor hours needed to produce an item. A cost driver is a factor that causes cost toincur, such as machine hours, direct labor hours and direct material hours. Activity-based costingallocates the costs of manufacturing a product according to the activities needed to produce the item.Managers should understand the advantages and disadvantages of both systems to meet the needs oftheir businessRetail farmacyActivity Based Costing (ABC) is a methodology that recognizes the causal link between resourceconsumption and product or service costABC examines those activities and associated costs needed to generate output instead oftraditional accounting methodologiesABC provides insight as to how efficiently and effectively resources are consumed throughvarious activitiesABC is a commonly used approach to allocating cost information
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