accounting 441


In what fundamental ways is activity based costing different from traditional costing methods such as job order costing? Please make sure you address why direct labor is a poor base for allocating in many companies. Provide an example for a product where direct labor is not appropriate.




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In order to obtain more accurate product cost, many companies now allocate overhead using activity-based costing. Under ABC, companies allocate overhead based on each product’s use of activities in making the product. For example, companies can keep track of their costs of setting up machines for each batch of a production process. Then companies can allocate part of the total set-up cost to a particular product based on the number of set-ups that products required.”




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