What are the major difficulties of activity-based costing?
These followed by a lack of top management support, difficulties of choosing of cost drivers, Activity-based costing software can be expensive and high cost consultants as the problem hindering the implementation of ABC, followed by difficulty in identifying activities, lack of local consultants, and changes required …
When should activity-based costing not be used?
If the overheads are relatively small, there is no use of Activity Based Costing. 3. Some companies are producing only one product or few products. If so, the Activity Based Costing cannot be applied.
What are the limitations of activity-based costing quizlet?
A frequently cited limitation of activity-based costing is: (a)ABC results in more cost pools being used to assign overhead costs to products. (b)certain overhead costs remain to be allocated by means of some arbitrary volume-based cost driver such as labor or machine hours. (c)ABC leads to poorer management decisions.
What are the pros and cons of activity-based costing?
Advantages and Demerits of Activity Based Costing (ABC)
- Accurate Product Cost:
- Information about Cost Behaviour:
- Tracing of Activities for the Cost Object:
- Tracing of Overhead Costs:
- Better Decision Making:
- Cost Management:
- Use of Excess Capacity and Cost Reduction:
- Benefit to Service Industry:
What is the primary barrier to using activity-based costing in a service company?
What is the primary barrier to using activity-based costing in a service company? A large portion of overhead costs are company-wide costs. Activity-based costing is used in service industries as well as manufacturing.
What is the weakness of traditional costing system?
1. It offers limited accuracy, even in the best of situations. Traditional costing may work when there are a handful of products being manufactured with low overhead costs. It does not offer the same accuracy when trying to look at the actual expenses that are incurred by an organization.
What are the benefits and drawbacks of activity-based costing?
Activity-based costing provides a more accurate method of product/service costing, leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers; and makes costly and non-value adding activities more visible, allowing managers to reduce or eliminate them.
Which of the following is a limitation of activity-based costing Mcq?
Question: Multiple Choice Question 104 which of the following is a limitation of activity-based costing? Less control over overhead costs Poorer management decisions ABC can be expensive to use More cost pools Click if you would like to Show Work for this question: Open Show Work Question Atte y Study MacBook Pro 2 5 6.
Which of the following is a limitation of activity-based costing?
A primary disadvantage of ABC is that it is not possible to divide some overhead costs such as the chief executive’s salary on a per-product usage basis. (1) ABC will be of limited benefit if the overhead costs are primarily volume related or if the overhead is a small proportion of the overall cost.