DIFFERENCE BETWEEN TRADITIONAL COSTING AND ACTIVITY BASED COSTING

ABC costing, that is, activity-based costing system, is argued in this paper that activitiesare costly, and that products also generate demand for the activity. The activity-basedcosting distributes uncompensable costs of production to products in a more reasonableway than traditional means. Activity-based costing first distributes production overheadto activities that are the real causes of these costs. Then the costs of these activities aredistributed to the products resulting from the activities. Activity-based costing is theresult of a more technical approach. The most basic benefit of an activity-based costingsystem is to determine how precisely the overall production cost is being generatedactivity wise and which activity areas are more competitive, and which products are morecompetitive. It also gives management the chances of operating manufacturing andservices in a more effective and efficient way.

کلیدواژه ها:

ABC ، productivity ، effectiveness ، efficiency ، right accounting keeping