Activity- Based Costing
There are several advantages in implementing activity-based costing over the traditional accounting methods. With activity-based costing, overheads are not arbitrary assigned to the goods or services. There is an aim to trace those costs to the different products. This results in correct costing analysis. Traditional methods lead to over-costing and under-costing and the management is unable to make a strategic decision wisely on which product to increase or cease production (Asada, Bailes & Suzuki, 2000).
The management is able to get clarity on which products increase the profit and which are a drain on the company resources. With accurate overhead ...
