Does anyone know the advantages and disadvantages of ABC activity based costing ? 10

Activity costing (ABC), also known as activity costing, is a costing method that more accurately allocates indirect costs and ancillary expenses to operations, production processes, products, services, and customers.

The advantages of the ABC costing approach focus on:

1. Expands the concept of cost habituation. The activity costing method uses cost drivers to explain cost habits, and divides costs into three categories: short-term variable costs, long-term variable costs, and fixed costs.

2. Make the cost calculation of enterprise products more correct. In addition to direct materials and direct labor can be directly attributed to the product, the manufacturing cost is also grouped into the homogeneous cost pool according to various operation activities, and then a reasonable operation allocation standard is selected to allocate the manufacturing cost in the cost library to the product. There are more and more specific cost allocation criteria, which makes many traditional uncontrollable indirect costs become controllable direct costs, which in turn provides more accurate information for cost control.

3. Optimize the product portfolio and improve the level of strategic decision-making of the enterprise. Product mix decision-making is the use of the "production value" of the entire enterprise to determine the profitability of products and the priority of production. 4. Dynamic tracking analysis.

The purpose of operation cost management is to eliminate non-value-added operations as much as possible, improve the efficiency of value-added operations, optimize the operation chain and value chain, increase customer value, provide timely and useful information, and reduce losses and waste to a minimum, so as to improve the scientificity and effectiveness of decision-making, calculation and control, improve the market competitiveness and profitability of enterprises, increase enterprise value, and achieve enterprise goals.

The disadvantages of the ABC costing method are:

1. Inward-looking limitations of cost management. Although the operation cost management goes deep into the operation level of the enterprise and puts forward the concept of the operation chain and value chain, it still focuses on the improvement and control of the internal production field of the enterprise and improves the internal efficiency of the enterprise, so it is still an inward-looking management, and fails to expand the cost control to the external field of the enterprise, nor can it control the cost from the perspective of long-term and product life cycle.

2. The workload is large and the implementation cost is high. The workload of job cost management is large, the operation process of the enterprise is complex, there are many operation centers, and the workload of basic data collection of cost drivers is very large, and the corresponding measurement cost is also high.

3. The cost coordination and supporting management between the operation centers cannot keep up. Some enterprises pay too much attention to the monthly changes of cost factors, but they lack corresponding measures and means for how to coordinate with each other among various cost bases and operation centers, control the process of cost generation, and reduce costs.

The traditional view of manufacturing expenses as a percentage of labor costs has led to the budgeting process to be determined as a fixed rate of direct labor, rather than on the basis of production's need for various support activities. With ABC, it is easy to determine a reasonable level of manufacturing expenses. As another example, the analysis of the cost drivers of order processing and material handling can be used to determine the budget of the purchasing department that is directly related to the production of the product.

In this way, the budget for manufacturing costs is more realistic, which can improve the level of management and cost control.

The ABC provides information on the cost of prior art, which can improve managers' evaluation of new production processes and can serve as a basis for evaluating the potential costs and benefits of technology development. For example, streamlining the production process and reducing the number of set-ups; Rationalizing the layout of the factory to reduce the cost of raw material handling and improving quality control to reduce the cost of inspection have a great impact on the cost of products. A more accurate understanding of the cost of a particular product may make computer-integrated manufacturing systems (CIMS) more attractive, as CIMS is particularly suited to high-mix, low-volume production environments, where these investments often do not seem cost-effective in traditional cost systems.

In addition, the analysis of activity and cost drivers provides a broad scope and more reasonable criteria for performance evaluation. At the same time, ABC can also be used to conduct in-depth analysis of products with different trademarks, different customers, and different distribution channels, which cannot be done in traditional accounting systems.

Activity-based costing method.

Example sentence: Activity based costing method.

cost controluses the activity based costing (abc method) of traditional accounting forreference. it provides some suggestions about cost control in both partly andwholly as well.

Cost control is mainly confirmed by drawing on the ABC method in accounting, and suggestions for cost control are put forward from two aspects: local and whole.

Hello classmates, I'm glad to answer for you!

Activity costing.

The costing methodology (a) determines the relationship between the occurrence of costs and each activity, (b) determines the underlying "drivers" of each activity, (c) establishes the cost aggregation points associated with each "driver", (d) establishes the cost rate of each activity, and (e) allocates costs to products based on the resources consumed (drivers).

Gordon wishes you a happy life!

Hello classmates, I'm glad to answer for you!

Activity-Based Costing (ABC)This costing method (a) determines the relationship between the occurrence of costs and each activity, (b) determines the underlying "drivers" of each activity, (c) establishes the cost aggregation points associated with each "driver", (d) establishes the cost rate of each activity, and (e) allocates costs to products based on the resources consumed (drivers).

Gordon wishes you a happy life!