What are the main costs and limitations of implementing ABC systems?
The main costs and limitations of ABC are the measurements necessary to implement the systems. Even basic ABC systems require many calculations to determine costs of products and services. Activity-cost rates often need to be updated regularly. Very detailed ABC systems are costly to operate and difficult to understand. Sometimes the allocations necessary to calculate activity costs often result in activity-cost pools and quantities of cost-allocation bases being measured with error. When measurement errors are large, activity-cost information can be misleading.
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Cost Accounting
- Why is the flexible budget variance the same amount as the spending variance for fixed manufacturing overhead?
- What are the steps in developing a budgeted fixed overhead rate ?
- How does standard costing differ from actual costing?
- How does the planning of fixed overhead costs differ from the planning of actual costing ?
- Describe three reasons for an unfavorable direct manufacturing labor efficiency variance ?
- List three causes of a favorable direct materials price variance?
- List four reasons for using standard costs.
- Describe the steps in developing a flexible budget?
- Why might managers find a flexible-budget analysis more informative than a static-budget analysis?
- Distinguish between a favorable variance and an favorable variance?
- What are two possible sources of information a company might use to compute the budgeted amount?
- What is the relationship between management by exception and variance analysis?
- Describe four signs that help indicate when ABC systems are likely to provide the most benefits?
- Describe four decisions for which ABC information is useful ?
- Why is it important to classify costs into a cost hierarchy?
- What is an activity based approach to designing a costing system?
- Define costing refinement? Describe three guidelines for costing refinement ?
- Why should managers worry about product overcosting or undercosting ?
- What is broad averaging and what consequences can it have on costs.
- When might a company use budgeted costs rather than actual costs to compute direct-labor rates.
- Three alternative ways to dispose of underallocated or overallocated costs.
- Describe three different debit entries to work in process control T account under normal costing.
- Distinguish between actual and normal job costing.
- Give two reasons why most organizations use an annual period rather than a weekly or monthly period to compute budgeted indirect costs ?
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