Activity-based-costing (ABC) can: Group of answer choices make managers realize that only products determine company profitability. only be used in a process costing system and not in a job order costing system. be used to determine the cost of direct materials and direct labor. be used with either a job order or a process costing system.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity-based costing: It is a method that helps in finding the activities performed by a company and it tracks the indirect costs to the activities of the company that consumes resources.
Cost driver: Cost driver is one of the measurements that help the company in tracing directly the number of units produced. It is considered as one of the casual factors, at the time of incurrence of the overhead cost. The cost driver is used as activity base while computing the overhead application rate.
Activity cost pools: A list of overhead categories that represents a cost associated with an activity that consumes overhead resources. Some of the examples for the activity cost pool are as follows machinery power cost, product inspection cost, purchasing department cost, maintenance cost.
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