Activity Based Costing (ABC) Assignment Example | Topics and Well Written Essays - 3000 words

Activity Based Costing ( alphabet) - Assignment ExampleHistorically, alphabet started to become popular as an alternative approach to tralatitious address story about three decades ago, where the latter has become progressively proving its irrelevance (Emblemsvag, 2010). The increasing automation of production as compared to being labor-intensive, the multiple product lines compared to small consider of products being produced, and the increasing overhead bell of companies are factors which are said to fix contributed to the popularity of rudiment (Emblemsvag, 2010). first rudiment is said to have addressed some outstanding issues which traditional cost accounting whitethorn have left hanging when it comes to question of reason or logic in cost allocation. Comparing the ii methods of allocating cost, Emblemsvag (2010) highlighted three salient points of ABC1.ABC assumes cost objects consume activities whereas traditional cost accounting assumes cost objects consume resour ces, 2.ABC uses drivers at various levels (hence consumption, and therefore cost varies at all levels), tour traditional cost accounting usually employs volume related allocation as bases for costs, and3.ABC is process oriented, while traditional cost accounting is process oriented.Higher productivity as a desired inclination or objective, therefore, is better achieved using activity based costing than traditional cost accounting. ... Such opportunities may not be readily available in a traditional cost accounting system, making ABC the wiser choice for productivity managers. Therefore, ABC is a tool that has proven to be a rich tool for efficiency and productivity performance, and probably an indispensable method of cost allocation and cost accounting for modern organisations. Many more typical benefits of ABC have been cited (Value Based Management, 2011), and among them are skill to chance upon the most and least profitable customers, products, and channels, Ability to easil y identify the root causes of poor financial performance, Ability to track costs of activities and work processes, Equip managers with cost intelligence to better drive improvements, Meet important marketing objectives, such as determination of a better marketing mix, enhancement of bargaining author with customers, and achieve better positioning of products in the market From the above premises it can be gleaned that ABC offers the better solution for any problem arising from overhead cost allocation. Definitely, ABC is an improvement of what traditional cost accounting aims to address, i.e., allocation of cost to where it matters most, keep costs down, and contribute to rising profit levels for the company through with(predicate) increased efficiency and productivity. But is ABC really perfect? Has it become the eureka of overhead allocation, where a lasting solution has been found to last a lifetime? Is there a downside, a lowlight, anything that ABC would not be able to achiev e? Is it the perfect cure? There are some weaknesses when ABC is implemented by organisations. But such weaknesses or limitations are far