Types Of Costing Flashcards
What is Activity Based Costing?
Costing that is generated by the level of activity
What are the advantages of ABC?
- It makes pricing and decision making more accurate
-it allows you to react and control costs
What are the disadvantages of ABC?
-ABC is more time consuming and costly
-ABC only works for businesses with a variety of products
What is Traditional Absorption Costing?
When production costs are included within standard costs of an item
What is the purpose of absorption costing?
-to see which cost centres and departments to estimate/apportion costs to (what GL to assign it too)
What are overhead costs generated by?
They are generated by the level of activity
What is the difference between how ABC and Absorption costing calculate absorption rate?
- ABC calculates based on total number of activities
-Absorption calculates based on labour hours
What factors outside cost affect the price you charge?
-customer demand
-competitiors
-objectives/goals (e.g may wish to price low for certain time)
What is the main differences between Conventional and Digital Costing?
-Conventional is cheaper than Digital Costing
-Conventional is more simpler and quicker method than Digital
-Conventional costs easy to establish whereas digital is hard to put amount on
-Conventional material costs is higher, whereas digital has no/little costs
-conventional has no maintenance costs whereas App does (needs IT experts)
What is the main difference in overheads between Conventional and Digital?
-Conventional is difficult to achieve accurate overheads as absorption and apportionment subjective
-Digital costs likely to incur are functionality and data related
What are the 3 types of Cost Identification?
- Timing of Costs
-Estimating Standard Costs
-Shared Costs
