Activity Based Costing As a One Step Attribution System Compared To Other Traditional Systems

As managers,we always try to relate the overheads costs by APPORTIONING to the various cost centres.

Remember that activity based costing is basically a ” one-step attribution system” as costs are NOT APPORTIONED between activities-the costs of each activity are RELATED DIRECTLY to products. Cost attribution is the process of relating cost to cost centres or cost units using cost allocation or cost apportion.

HOWEVER,

remember that for Absorption costng- it is a MULTI-STEP cost attribution system. Many overhead costs for example a human resource department may be apportioned to overhead cost cntre which are THEN apportioned to production costs centres before being absorbed by products.

AND

Marginal costing MAKES NO ATTEMPT to attribute overhead costs to products.

• What is Activity-Based Costing System?
• Limitations of Activity-Based Costing (ABC) System
• Difference Between ABC system versus Traditional based costing system
• Introduction and Benefits/Advantages of Activity-Based-Costing System (ABC)
• What is Activity based budgeting and briefly describe how it could bring improvements to the budgeting process of an organization
• Steps In Implementing Activity-Based Costing System(ABC):
• Answer To Accounting Test Question No. 1 On Activity Based Costing