Comment on post below-thanks Is ABC info always better than Average-cost? No… not always. ABC costing will...

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Accounting

Comment on post below-thanks
Is ABC info always better than Average-cost? No… not always. ABCcosting will surely be more detailed and most likely more accurate,however will an organization's benefits of ABC outweigh the addedintricate, time consuming costly characteristics?
One factor to consider in this would be the amount of overheadcosts an organization tends to operate with. ABC should be used"when overhead is high, because small changes in each product costcan make a large difference overall." A company who produces onesingle product would likely have low overhead as most of the costswould be direct costs associated with the single product. In thissituation, ABC benefits would not outweigh the costs and timerequired to produce ABC information.
“While ABC isn't allowed for external financial reporting,companies may find it useful to enact an ABC system to moreeffectively analyze cost data.” Since ABC does not conform to GAAPfor external reporting requirements, a company essentially has toreport on costs twice. It’s important for organizations to considerthe added time and cost of now reporting two different ways.

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Activity based costing ABC is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore fixed cost Activity based costing system is used to determine product costs for special management reports This system is ordinarily used as a supplement to the companys usual costing system Most organizations that use ABC system have two costing systems the official costing system that is used for preparing external financial reports and the activity based costing system that is used for internal decision making and for managing activities In traditional cost accounting systems the objective is to value inventories and cost of goods sold for See Answer

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