Principles of Managerial Accounting · free preview
Comparing Traditional and Activity-Based Costing Systems
Traditional and activity-based costing differ in pools, drivers, accuracy, and cost, and choosing between them is an economic decision that weighs distortion against measurement expense.
1. Structural differences
Structural differences
2. The accuracy trade
The accuracy trade
3. Decision consequences compared
Decision consequences compared
4. Behavioral effects
Behavioral effects
5. Structural difference core
What is the core structural difference between traditional and activity-based costing?
6. Cost of accuracy
What does ABC spend to gain accuracy? Use the figures from the worked example in this lesson and state the result in the requested units.
7. Profitability reversal
After adopting ABC, a company typically discovers which products were misjudged?
8. Hybrid practice
Why do many companies run hybrid costing systems?
9. Volume-based driver example
The classic traditional-allocation driver is direct labor-____ or machine-hours. One word.
10. Activity counts as metrics
Once ABC measures activities, the counts themselves become performance ____ that managers work to reduce. One word.
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