Essay StatsEssay Stats

  • Posted By: logan_MBA
  • Date Posted: 12/04/2010
  • Category: Business
  • Words: 2452
  • Pages: 10
  • Views: 1263
  • Rank: 69

ABC vs. Traditional Costing Methods

We have many free term papers, essays, and research papers on ABC vs. Traditional Costing Methods. You can browse our entire essay database or use our search engine to locate exactly what you are looking for.


Already a Member?

ABC vs. Traditional Costing Methods

I. Introduction

Multiple objectives are pursued in this paper. The first objective is to discuss and compare traditional cost accounting methods and activity-based costing methods. The second objective is to determine the extent to which activity-based costing methods are used in the United Arab Emirates (UAE). The third objective is to determine why some organizations in the UAE continue to use traditional cost accounting methods. The fourth objective is to develop a recommended strategy to increase the use of activity-based costing in the UAE.

II. Traditional Methods of Costing

The traditional costing model includes six elements. These elements are as follows (Garrison, Noreen, & Brewer, 2007):

For product-costing purposes, a company is separated into functional areas of activity - manufacturing, marketing, financing, and administration

Manufacturing costs of direct materials, direct labor, and manufacturing overhead are subject to inventory costs

Direct materiel and direct labor costs are considered to be traceable directly to specific products

Manufacturing overhead costs are treated as indirect product costs, and they are charged to specific products at predetermined overhead rates

When a single, company-wide, predetermined overhead rate is used, overhead is charged to all products with no consideration for differences in resource use

The functional costs of marketing, financing, and administration are accumulated in cost pools, and they are applied in the period in which they are incurred; these costs are not treated as product costs nor are they related to specific products in product profitability comparisons

Full costing (absorption costing or activity-based costing) considers all costs to be product costs. Thus, all overhead costs are allocated to costs of production for specific products. Traditional costing, by contrast, includes only the costs for those factors that change with the production of an additional ...


Already a Member?

Join Now

  • Instant access to our free essays database
  • Manage your saved papers and more…


Saved Essays

Save it and find them easier later.

    Similar EssaysSimilar Essays

    ABC vs. Traditional Costing Methods