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7 Cards in this Set
- Front
- Back
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Why is ABC costing used more now in comparison to 30 years ago? |
Manufacturing is now more machine intensive and therefore production overheads have increased. These are a large proportion of costs and need to be monitored accordingly |
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What is a cost pool? |
A cost pool is an activity that contains a specific form of overheads |
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What are the advantages of using ABC costing? |
More accurate information, Helps with pricing, performance management, and decision making. Highlights unit types that are causing costs to increase Recognises that overheads are not directly attributable to the volume of sales Fairer allocation of overheads |
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What are the disadvantages of ABC costing? |
Not useful if a business has limited overhead costs - no cost benefit of producing Not all overheads can be allocated to specific production The choice of cost driver could be inappropriate Can be complicated to calculate and explain to others |
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What is a cost driver? |
The cause of a cost - the activity |
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Describe the characteristic of just in time |
Made to order and hold no inventory Quick production as highly trained staff, highly automated and good relationship with suppliers Continuous improvement and right first time attitude |
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Why is it important to use an effective costing method? |
To calculate competitive selling prices Better decision making Better planning |
