Swot Analysis : Abc Costing System

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Portfolio 2, ABC Nowadays, the development of technology allow the company reduce the cost from direct labour and material cost, but the indirect or overhead cost become significant high. Therefore, price decisions on each product become essential. ABC costing system is a form of splitting overhead costs into different overhead activities. The costs are then allocated to products or projects proportionally by their cost driver activity levels. In another words, this system result the manager to look at the more accurate overhead cost from each products which they producing, then find out the intrinsic value of the product to make a fair price decision. -Advantage using ABC over traditional method Implementing ABC could be a challenging task for any organizations and the procedures carries several strength and drawbacks. The major strength of ABC over traditional method is ABC has a moderate impact on time, a significant impact on quality, and a substantial impact on cost (Gering, 1999). The ABC could provide manager more accurate cost than traditional method. By transferring overhead costs to individual units of products or services, ABC helps recognize inefficient or non-profitable products or activities that eat into the profitability of efficient processes or highly profitable products. But the traditional method only have single plant wide rate which to allocate their overhead. Moreover, the traditional cost may only talk about the product cost but the ABC can give

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