The Introduction and Advantages of the Activity-Based Costing

If you are a commerce student then activity-based costing must be a familiar word for you but your little knowledge won’t be enough to write an effective assignment. You have to conduct a good research on the term to understand what actually does it mean and what are the advantages of using this costing method. Students who are new to this concept should know that activity-based costing is accounting used to identify the activities performed within a firm. This method is important for the firm as they couldn’t make the decision based on the faulty information. In case if you are looking for the activity-based costing assignment help then BookMyEssay is here for you. The subject experts at the website are working on the assignment for a long time and are familiar with all possible assignment topics.

What is Activity-Based Costing Assignment Help

The activity-based costing known as ABC is the two-step accounting method of costing. The first step includes the identification of the activities in the firm and in the second step they identify the products and services assigned to the form. In simple words, it is the costing of the products and services which is based on the activities performed to manufacture the particular product and service. Confusing? Let’s take an example to understand it in a better way. Now imagine you are creating the product A for which you have to follow the activity X, let’s say the activity X is not followed for the production, instead of that another activity Y is followed. Now the cost of performing activity Y will automatically allocate the product A. Unlike other product-based costing methods the activity-based costing is much refined and suitable for the current industry.

Advantages of Using the Activity-Based Costing

In case if still unsure whether it is good to switch from your current accounting method to the activity-based costing then here is the list of advantages you will get with activity-based costing.

  1. Accurate product cost: The main advantage of using activity-based costing is it provides the accurate product cost by focusing on the cause and relationship in cost incurrence. It recognizes the activities that affect the overall production cost and the product that consume activities. In the advanced manufacturing environment where the support function takes over a large portion of the total cost, the activity-based costing gives the exact product cost.
  1. Information about the cost behaviour: The activity-based costing help to identify the real nature of the cost behaviour and how does it change over time. It basically differentiates the product activities into two categories the activities that fall in the first category are those which add the value to the product and the second category include those products who don’t add value to the product. With the activity-based costing dissertation research proposal writing help, it is easier to control the fixed cost by taking control of the activities that are causing the high cost in the production process
  1. Tracking the activities of the production: The activity-based costing uses the multiple drivers to determine the actual cost involved in each activity of the production. Further, the activity-based costing is concerned with the activities within and the beyond of the factory to find out the more overhead of products.

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