B Com Exam > B Com Notes > Cost Management > Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management
Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com PDF Download
Allocation of Overheads under ABC:
The short-term variable costs should be identified to products using volume related cost drivers such as direct labour hour, direct material cost, machine hours etc. Kalpan and Cooper claimed that volume related cost drivers are inappropriate for tracing long-term variable costs to products because they are driven by complexity and variety and not by volume and the key to understanding what causes (drivers) overhead costs in transactions undertaken by support departments costs and factory overheads to product lines under ABC system is shown in the following figure:
Steps to Develop ABC System:
The steps required to develop an ABC system are as follows:
1. Identify the main activities performed in the organization, such as manufacturing, assembly etc., as well as support activities, including purchasing, packing and dispatching.
2. Identify the factors which influence the cost of each activity- the cost drivers.
3. Collect accurate data on direct labour, material and overhead costs.
4. Establishing the demands made by particular products on activities, using the cost drivers as a measure of demand.
5. Trace the cost of activities to products according to a product’s demand for each activity.
Characteristics of ABC:
Important characteristics of ABC are noted below:
1. Simple traditional distinction made between fixed cost and variable cost is not enough guide to provide quality information to design a cost system.
2. The more appropriate distinction between cost behaviour patterns are volume (scale) related, diversity (scope) related, events (decisions) related and time related.
3. Cost drivers need to be identified. A cost driver is a structural determinant of cost related activity. The logic behind is that cost drivers dictate the cost behaviour pattern. In tracing overhead cost to product, a cost behaviour pattern must be understood so that appropriate cost driver could be identified.
The document Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com is a part of the B Com Course Cost Management.
All you need of B Com at this link: B Com
|
48 videos|51 docs|17 tests
|
FAQs on Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management - Cost Management - B Com
| 1. What is the difference between traditional costing and activity-based costing (ABC)? |  |
Ans. Traditional costing allocates overhead based on a single predetermined rate, while ABC assigns overhead costs based on the actual activities that drive those costs.
| 2. How does ABC improve the accuracy of overhead allocation compared to traditional costing methods? | |
Ans. ABC provides a more accurate allocation of overhead by identifying and assigning costs to specific activities that drive those costs, rather than using a broad predetermined rate.
| 3. What are the characteristics of ABC that make it a preferred method for overhead allocation in certain industries? | |
Ans. Characteristics of ABC include a focus on activities that drive costs, better cost control and management, improved decision-making, and more accurate product costing.
| 4. How does ABC help in identifying and eliminating non-value-added activities in a production process? | |
Ans. ABC helps identify non-value-added activities by tracing costs to specific activities, allowing managers to see where resources are being wasted and make more informed decisions on eliminating or reducing these activities.
| 5. Can ABC be implemented in any type of organization, or is it more suitable for specific industries? | |
Ans. While ABC can be implemented in any organization, it is more suitable for industries with complex production processes, diverse product lines, and high overhead costs, where traditional costing methods may not accurately reflect the true cost drivers.
Related Exams
About this Document
|
1.6K Views |
|
4.85/5 Rating |
|
Nov 22, 2024 Last updated |
Document Description: Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management for B Com 2024 is part of Cost Management preparation.
The notes and questions for Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management have been prepared according to the B Com exam syllabus. Information about Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management covers topics
like and Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management Example, for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management.
Introduction of Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management in English is available as part of our Cost Management
for B Com & Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management in Hindi for Cost Management course.
Download more important topics related with notes, lectures and mock test series for B Com
Exam by signing up for free. B Com: Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com
Description
Full syllabus notes, lecture & questions for Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com - B Com | Plus excerises question with solution to help you revise complete syllabus for Cost Management | Best notes, free PDF download
Information about Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management
In this doc you can find the meaning of Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management defined & explained in the simplest way possible. Besides explaining types of
Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management theory, EduRev gives you an ample number of questions to practice Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management tests, examples and also practice B Com
tests
|
Explore Courses for B Com exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
Related Searches
Objective type Questions
,Summary
,Extra Questions
,Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com
,Semester Notes
,Exam
,study material
,Viva Questions
,Sample Paper
,Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com
,Free
,practice quizzes
,past year papers
,Important questions
,video lectures
,MCQs
,shortcuts and tricks
,mock tests for examination
,ppt
,Previous Year Questions with Solutions
,Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management | Cost Management - B Com
;
Additional Information about Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management for B Com Preparation
Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management Free PDF Download
The Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management is an invaluable resource that delves deep into the core of the B Com exam.
These study notes are curated by experts and cover all the essential topics and concepts, making your preparation more efficient and effective.
With the help of these notes, you can grasp complex subjects quickly, revise important points easily,
and reinforce your understanding of key concepts. The study notes are presented in a concise and easy-to-understand manner,
allowing you to optimize your learning process. Whether you're looking for best-recommended books, sample papers, study material,
or toppers' notes, this PDF has got you covered. Download the Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management now and kickstart your journey towards success in the B Com exam.
Importance of Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management
The importance of Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management cannot be overstated, especially for B Com aspirants.
This document holds the key to success in the B Com exam.
It offers a detailed understanding of the concept, providing invaluable insights into the topic.
By knowing the concepts well in advance, students can plan their preparation effectively.
Utilize this indispensable guide for a well-rounded preparation and achieve your desired results.
Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management Notes
Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management Notes offer in-depth insights into the specific topic to help you master it with ease.
This comprehensive document covers all aspects related to Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management.
It includes detailed information about the exam syllabus, recommended books, and study materials for a well-rounded preparation.
Practice papers and question papers enable you to assess your progress effectively.
Additionally, the paper analysis provides valuable tips for tackling the exam strategically.
Access to Toppers' notes gives you an edge in understanding complex concepts.
Whether you're a beginner or aiming for advanced proficiency, Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management Notes on EduRev are your ultimate resource for success.
Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management B Com Questions
The "Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management B Com Questions" guide is a valuable resource for all aspiring students preparing for the
B Com exam. It focuses on providing a wide range of practice questions to help students gauge
their understanding of the exam topics. These questions cover the entire syllabus, ensuring comprehensive preparation.
The guide includes previous years' question papers for students to familiarize themselves with the exam's format and difficulty level.
Additionally, it offers subject-specific question banks, allowing students to focus on weak areas and improve their performance.
Study Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management on the App
Students of B Com can study Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management alongwith tests & analysis from the EduRev app,
which will help them while preparing for their exam. Apart from the Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management,
students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc.
The EduRev App will make your learning easier as you can access it from anywhere you want.
The content of Allocation of Overheads Under ABC and Characteristics of ABC - Cost Management is prepared as per the latest B Com syllabus.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup