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Introduction Due to a number of changes taking place in the business environment due to globalization and technology innovation, it has become necessary for the businesses to make some innovations in the use of financial and non financial information in the organizations.The demand of the new environment is up to date information about the costs of the processes, products, services and customers of the organization.
Besides allocation of cost to the product accurately ABC also helps in managing cost by providing detailed information about the cost and its behaviour (Thorne, H. The use of ABC helps the management in making decisions regarding the production of the products and quantity produced.
Thus ABC helps in developing the detailed and successful Decision support system (DSS), we can say that ABC costing will be suitable for both manufacturing as well as service organizations. At the same time, we can also say that ABC in service sector is applied only in typical service industries such as banking sector, health care and logistics and that too in a modified version which is Time Driven Activity Based Costing, TDABC which unlike ABC which usually collects the proportion of time, TDABC is more interested in actually time spend for particular activities.
Some cost of resources which are easy to account for the product as they can be directly associated with the production of the product like ink in the pen, paper in the Book, however the challenge lies in accounting for the cost of the resources where the connection between the resource and the product manufactured is indirect and not precise, like repair and maintenance to the machinery used for the production of multiple products.
ABC helps in associating this indirect cost to the products based upon the quantum of services utilized by the product irrespective of the volume of its production. Thus ABC will help an organization to identify the cost of its product more specifically and accurately and then control the cost.
Cost Driver is the activity that proves cause and effect the relationship with the overhead cost and the cost pool.
The cost pools are assigned to the products on the basis of the cost driver.Cost accounting ensures to record the income, expended and maintain statistical documents.We possess best expertise related to cost accounting assignment help, this is one of the reasons that we are able to deliver to our students the best results time and time again.Activity Cost Pool are the cost of each activity identified.Overheads are identified to the cost pool based on the cost driver.Profit, loss, investment, revenue and expenditure are the key values for the cost accounting system that enable a system to function better and benefit.Cost accounting implies to be a method of bookkeeping for expense and it also trials to uphold the operative areas such as cost computing, analysis, control, compare and funds.It identifies the activities as the fundamental cost objects.The ABC costing system assumes that activities cause the costs.The cost involved in the manufacturing of goods or creation of services is the actual cost of a company.It can be described as the actual expenditure made by a company to acquire assets that comprises of cost to deliver, supplier-invoiced expense and testing of the assets.