Explanation of difference b/w two costing terms

[redblack223]

I am currently taking Cost Accounting and I am stuck when it comes to Activity-Based costing. If anyone can offer any help or suggest any sources that would be great!!!

[Muhammad Adnan Arshad]

& also post the main differences b/w "ABC System/Modern Product Costing Technique" & "ABC Inventory Management Plan/Pareto Analysis/CIE Method"

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[mushi]

the proper definition is An activity is a process which adds value and consumes resources!


activity based costing is an approach to the costing and monitoring activities
which involves identifying the activities that are responsible
for the generation of costs!

the principles of abc are-
i; ActivitieS(not products) generate costs
ii; ProductS consume activities

[the_farhan]

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in simple words, the basic difference b/w tradditional costing n ABC costing is tht in conventional costing, FOH is calculated based on some FOH-rates tht r computed n then applied blindly to entire production.

in ABC costing, the philosophy is tht costs result from various activities . n each activity incurs different amount of FOH. so each product n activity shud get "its" portion of FOH.

it helps mgmt to re-engineer the processes n procedures n hlps to control n manage costs in better way.

i hope u got the core concept.
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