Presentation on activity based costing

Name ankit sharma Roll no. 11

Meaning of activity based costing

The collection of financial and operational performance information tracing the significant activities of the firm to product cost. Activity based costing is that costing in which cost are first traced to activities then to product.

Objectives of activity based costing

To remove the distortion in computation. To help in decision making. To identify various activities of production. To distribute overhead on the basis of activity. To identify the opportunities for improvement. To eliminate non value adding activities.

Working of activity based costing

Understand and analyzing manufacturing process. Study of the activities involved. Activity cost pool. Cost drivers. Identification of costs with products. Conclusion.

Classification of activities in manufacturing organization

Unit level activities Batch level activities Product level activities Facility level activities

Limitations of activity based costing

Complex system. Beneficial only for big organization. Difficult to attribute costs. Only trained professional can do it. Support of top management required. High level of time and money required.

Importance of activity based costing

Accurate and reliability Realistic product cost Help to reduce cost Help to decision making Optimum utilization of resources Reduce wastage