week 3 discussion.docx - Analyze the major benefits and major weaknesses of traditional Activity-Based Costing(ABC in determining accurate overhead

week 3 discussion.docx - Analyze the major benefits and...

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Analyze the major benefits and major weaknesses of traditional Activity-Based Costing (ABC) in determining accurate overhead costs over an ABC system. Provide a rationale for your response. Suggest the manner in which a business can achieve a competitive advantage in the marketplace through the use of ABC. Provide two (2) reasons to convince senior management that they should implement an ABC system. Activity based costing is a method for allocating overhead (in-direct) cost to multiple activity cost pool by means of cost drivers. Activity is the event, action or transaction that incurs the cost. The cost pool is the distinct activity and the cost driver is any factor that has a direct relationship (cause and effect) with the resources consumed. The major benefit of an activity-based costing is to provide an accurate cost information in helping manager make decisions. ABC recognizes a products’ use of resources, which also increase the accuracy of product cost and it enhances controls over overhead costs. On the other
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  • Fall '10
  • GAT
  • Cost driver

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