Question

contrast ABC to traditional costing

Answer 1

1. The differences are in the accuracy and complexity of the two methods.

2. Traditional costing is more simplistic and less accurate than ABC, and typically assigns overhead cost to products based on an arbitrary average rate.

3. ABC is more complex and more accurate than traditional costing.

4.Traditional cost accounting is obsolete whereas Activity Based Accounting is used more by various target-oriented companies.

5. ABC methods help the company to identify the needs of keeping or eliminating certain activities to add value to the products.

6. TCA methods focus on the structure rather than on processes whereas ABC methods focus on the activities or processes rather than on the structure.

7.ABC provides accurate costs whereas TCA accumulates values arbitrarily.

8. TCA is almost obsolete where as ABC methods are largely in use since 1981.