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ABC – 2 Quiz to check your knowledge!

ABC – 2 Quiz to check your knowledge!

Activity Based Costing better known as ABC is method of costing which determines cost based on individual activity performed for product. This contrasts with traditional costing, which sometimes assigns costs using somewhat arbitrary allocation percentages for overhead or the so-called indirect costs. We can say that  in order to overcome the inadequacies of traditional methods of overhead absorption, ABC has been devised.

Although ABC has many advantages over traditional costing system but at the same it has some disadvantages. ABC is more expensive to implement than traditional costing.  It is a complex system which need lot of record for calculations and hence requires skilled manpower.Reports generated by this systems do not conform to generally accepted accounting principles (GAAP).

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