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Activity Based Costing As a One Step Attribution System Compared To Other Traditional Systems

As managers, we always try to relate the overheads costs by APPORTIONING to the various cost centres.

Remember that activity based costing is basically a ” one-step attribution system” as costs are NOT APPORTIONED between activities-the costs of each activity are RELATED DIRECTLY to products. Cost attribution is the process of relating cost to cost centres or cost units using cost allocation or cost apportion.

HOWEVER,

remember that for Absorption costng- it is a MULTI-STEP cost attribution system. Many overhead costs for example a human resource department may be apportioned to overhead cost cntre which are THEN apportioned to production costs centres before being absorbed by products.

AND

Marginal costing MAKES NO ATTEMPT to attribute overhead costs to products.

This entry was posted on Saturday, November 10th, 2007 at 3:05 am and is filed under 6.Activity Based Costing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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