BUAD 250b Case 1 problem 4c

BUAD 250b Case 1 problem 4c - The overriding issue with...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
The overriding issue with Activity-Based Costing is, while it provides a more accurate picture for internal decision making, it is not required by GAAP ( Generally Accepted Accounting Principles ) and therefore an extra cost. There are many benefits to an Activity- Based Costing system, including but not limited to, a more accurate description of where costs originate from, better placement of overhead costs, the ability to determine if one product/service is more profitable than another and the ability to determine if one product/service is operating at a loss and should either be restructured or replaced. As we see in our case, Traditional Costing presents one picture while Activity-Based Costing paints a different picture with great room for improvement. Technically, the main difference between Traditional Costing and Activity-Based Costing ( ABC ) is ABC uses different cost drivers for each overhead cost rather than assuming all costs operate at the same ratio as the predetermined cost driver. This assumption made by Traditional
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.
Ask a homework question - tutors are online