Question

Locate an article (preferably from a professional as opposed to an academic journal) that covers one of the following topics: traditional job order costing, process costing, or activity-based costing. Provide a brief summary of the article and compare the application of the concept in the article with the coverage of the concept. Also please provide references.

Answer 1

I have chosen an article on Activity Based Costing.

Activity based costing is defined as a technique of indentifying cost with each cost driving activity and making it as the basis for apportionment of costs over jobs/products/services. The steps involved in activity based costing can be summarised as below:

(i) Identification of activities that incur costs

(ii) Assiging the costs to the activity pools

(iii) Calculate cost drivers

(iv) Assign the costs to the job/product/ service based on cost drivers

Benefits of ABC include:

(i) Costs are assigned to cost objects,hence more realistic

(ii) Efficient activities can be identified and unnecessary activites can be eliminated

(iii) Better understanding of overheads

(iv) Supports management performance and scorecards

Reference: https://www.cgma.org/resources/tools/essential-tools/activity-based-costing.html