Activity-Based Costing

Activity-Based Costing
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Activity-Based Costing
In accounting, the two primary costing systems are the Traditional Absorption Costing (TAC) and Activity-Based Costing (ABC). Managers find it necessary to apply ABC since it gives more accurate product costs (Omar & Hasan, 2020). ABC breaks down the overhead costs related to production activities. Indeed, it assigns costs to every activity, which goes into production. In that light, using ABC can show an individual the products or services that are highly profitable. ABC shows that distinctive products have different indirect expenses. The most significant thing about it is that ABC works appropriately in complex environments, where there exist numerous manufacturing activities and production processes.
ABC will be one of the costing systems that I will use in my future career. First, it will help me to consider overhead and direct costs of product creation. In that light, it would be easy to determine the products and services making more profit than others. Second, ABC will enable me to set prices accurately (Alsayegh, 2020). Since all expenses are recorded when using this method, it would be straightforward to set prices...