What is traditional costing, Managerial Accounting

Assignment Help:

What is traditional costing

In traditional costing overheads are first related to cost centers (production and service centres) and then to cost object, i.e. production. ABC overheads are related to activities or grouped into cost pools (depending on the terminology preferred). Then they are related to the cost objects for example production. The two processes are therefore very similar but the first stage Is different as ABC uses activities instead of functional departments (cost centres) . the problem with functional departments is that they tend to include a series of different activities which incur a number of different cost that behave in different ways. Activities also tend to run across function for instance procurement of materials often includes raising a requisition note in a manufacturing department or stores. it is not in the purchasing department where most procurement costs are incurred. Activity cost tend behave in a similar way to the way in which casts behave.

As with traditional absorption costing ABC rates are calculated in advance normally for a year ahead and so the same rates are used for at a time. The advantage of this is that any seasonal variations will be spread giving an average cost. If this was not done and actual rates were used the absorption rates would vary monthly. This would mean that when output was high the overhead rate would be low and vice versa; if pricing were based on cost the prices quotes would be higher when the business was slack.

 


Related Discussions:- What is traditional costing

Relevant Cost, Outline Five characteristics of relevant cost

Outline Five characteristics of relevant cost

Case study, FOR each of the following cases, indicate why management and th...

FOR each of the following cases, indicate why management and the auditors determined that control deficiency was a material weakness. Case1. In our assessment of the effectiveness

Qt, x+2y+3z=6 2x+4y+z=7 3x+2y+9z=14

x+2y+3z=6 2x+4y+z=7 3x+2y+9z=14

Advance factoring and maturity factoring, Advance Factoring and Maturity Fa...

Advance Factoring and Maturity Factoring: In both recourse and non-recourse factoring whether the factor advances cash against book debts to the client instantly on assignment

Z or t statistics, Z or t Statistics If n ≥30 we use Z, if, n Ho:  B ...

Z or t Statistics If n ≥30 we use Z, if, n Ho:  B = O that is, there is no relationship between X and Y HA:  B≠ O There is a significant relationship between X and Y The l

Lock box system, Lock Box System:   In this type of system, the customers a...

Lock Box System:   In this type of system, the customers are advised to mail their payments to a post office box hired through the firm for collection purposes near their region. T

Starbucks project, 1) FUTURE CASH FLOWS: Prepare a three (3) year forecast ...

1) FUTURE CASH FLOWS: Prepare a three (3) year forecast of estimated future cash flows for starbucks and give valid economic/business reasons for your projections. This means you w

Transient analysis-absorbing state, Transient Analysis A state is said...

Transient Analysis A state is said to be transient if it is impossible to move to that state from any other state except itself. This state is temporary and eventually a stead

What is pricing decision, Introduction to pricing decision A pricing d...

Introduction to pricing decision A pricing decision is one of the most crucial and difficult decision that a firm has to make. It is one of the most difficult decisions. Such

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd