Activity-based costing systems are quite complex with eachactivity cost and department usually getting a...

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Accounting

Activity-based costing systems are quite complex with eachactivity cost and department usually getting a lot of attention.What are the most important factors in developing cost factors foreach activity?
Despite all the analysis usually done, such cost systems tend toinaccurately assign too much overhead in certain circumstances andtoo little overhead in others.
Why might that distortion occur?
How might understanding the hierarchy of activities help explainhow to combat this trend?"

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Activitybased costing ABC is an accounting method that identifies and assigns costs to overhead activities and then assigns those costs to products An activitybased costing ABC system recognizes the relationship between costs overhead activities and manufactured products and through this relationship it assigns indirect costs to products less arbitrarily than traditional methods The most important factors in developing cost factors for each activities are 1 Accurate Product Cost ABC brings accuracy and reliability in product cost determination by focusing on cause and effect relationship in the cost incurrence It recognises that it is activities which cause costs not products and it is product See Answer

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In: AccountingActivity-based costing systems are quite complex with eachactivity cost and department usually getting a lot...Activity-based costing systems are quite complex with eachactivity cost and department usually getting a lot of attention.What are the most important factors in developing cost factors foreach activity?Despite all the analysis usually done, such cost systems tend toinaccurately assign too much overhead in certain circumstances andtoo little overhead in others.Why might that distortion occur?How might understanding the hierarchy of activities help explainhow to combat this trend?"