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Drivers still Right?
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Activity Based Costing
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Manwel
22
Manwel, Lebanon

Drivers still Right?

ABC is one of the most recent developed evolutions in costing. It has a big impact in allocating the cost to the right object... But still the question is: to what extent are the drivers right and effective? Does ABC require ongoing update of drivers?

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  Maggie
0
Maggie, China
 

Activity Based Costing Limitation

Cost drivers are not easy to define and obtain.

  Rajendra Patil
2
Rajendra Patil, India
 

Definition of Drivers

Generally people use the term 'accuracy' for both the ‘driver’ and the ‘driver data’ interchangeably. It may not be the case here though.
I would suggest that the definition of resource and activity drivers (ref. cam-i cross) must be very accurate. The corresponding data does not have to be so accurate initially. This accuracy of the data can be increased in the future (if required). But if the driver definition is inaccurate, then even if the driver data is accurate, the calculations would still be useless..
A cost driver (by cam-i cross definition) is a reason for the activity to have costs. For example:
Activity - assemble product
Cost driver: - # of parts to assemble
- design of the product
- quality of the parts received
The cost of the activity ‘assemble product’ would change if # of parts change or design change or the quality of the components change.

  Debasish Basu
0
Debasish Basu
Accountant
 

Management Accounting

Realistic approach of practical utility.

 

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Special Interest Group


More on Activity Based Costing
Summary Discussion Topics
topic Limitations and Advantages of ABC for Budgeting
topic Limitations ABC monitoring operations
topic ABC in an Advertising Firm?
topic The Cost of Non-value-added Activities
topic ABC: reduce non value adding activities?
topic Consequences of ABC Analysis
topic Capacity Minutes and Industry Norms
👀Drivers still Right?
topic ABC Helps Companies Survive Recession
topic Traditional Costing versus Activity Based Costing
topic The Process of Activity Based Costing (ABC) simplified
topic Activity Based Costing (ABC)
topic Conditional Resources in ABC
topic ABC in service companies such as airlines?
topic Overhead Costing - Food Manufacturing
topic Degree of Detail in ABC
topic Activity Based Costing Implementation
topic ABC and Decision making
topic Time-driven ABC (TDABC)
topic Activity Based Management (ABM)
topic Calculating the Most Profitable Way of Manufacturing a Product
topic ABC or TOC? The Differences between Activity Based Costing and the Theory of Constraints
topic Recommended ABC Software
topic Comparison Activity Based Costing, Time-Driven-ABC and Lean Accounting
topic ABC Costing in Make to Order of Repetive Manufacturing
topic Organizational Issues when Introducing ABC
topic Over Recovery / Under Recovery Level
🔥 What is Process Costing?
topic ABC in the Federal Environment
topic An ABC Initiative is Only as Effective as the Software That Supports It
topic What is Job Order Costing?
topic How to Derive Overhead Cost from a P&L?
Special Interest Group
Knowledge Center

Activity Based Costing


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