Difference Between Traditional Costing And Traditional Costing

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Comparison between Traditional costing and ABC

Traditional costing 148 131 94 141
Activity based costing 371.76 268.42 119.55 280.19 - -223.76 -137.43 -25.55 -139.19

Hence we can Estimated Indirect (overhead) cost per unit is quite different for each product, unlike the traditional costing where indirect costs per unit were the same for all four products. This approach recognizes that product W uses more activity pool resources than product X , product Y and product Z .

(source : https://www.business-case-analysis.com/activity-based-costing.html. )

Part 2
Difference between Traditional costing method and activity based costing method .
Costing helps an organization to establish the cost of goods with the help of the revenue it generated . the two main types of costing method used by any organizations are traditional costing method and activity based costing method , traditional costing assigns manufacturing overhead based on the quantity of a cost driver such as duration required inorder to produce a product . a cost driver is a aspect that
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simple use for organisation that give one thing furthermore is at least a . However , traditional costing is an outdated costing method in numerous organisation in light of the way that those assembling organisation now use machines and PCs for a considerable amount of their era. PCs and machines make the method out of date in light of the way that it oftentimes uses guide labor hours to calculate cost. Cost is not appropriately consigned because direct labor hours is not the best cost driver to use. traditional costing negates other cost drivers that may add to the cost of an item . Another disadvantage of solely using the traditional costing method is that it can provoke dreadful administration decisions since it precludes certain nonmanufacturing costs

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