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Unformatted text preview: wages, fuel, depreciation of the truck, insurance, etc. The quantities of the resources that will be consumed by this activity are influenced by the number of deliveries made per year. Hence the cost driver could be the number of deliveries. A cost driver is the reason why the cost is incurred in other words, the cost is incurred in producing the driver. What are the limitations of activity based costing? There are several limitations to ABC. Firstly it is expense to implement and maintain, both in time and money . It still faces issue allocating some overheads to activities, for example supervisor salaries. Management and employees can be resistant to the data it provides as it can make their performance look poor. They may even provide poor quality source data if they feel threatened....
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- Spring '10
- Cost Accounting