Usefulness of Activity-Based Costing System in Management Accounting
VerifiedAI Summary
This essay discusses the usefulness of activity-based costing system over the traditionally used methods to allocate the costs to the products. It explains how ABC system is highly useful in identifying the important activities within a department and allocating accurately their overhead costs. The benefits of using ABC costing system in comparison to the conventional system of costing are also discussed. The essay also explains the hypothetical example to explain the use of activity based costing. The limitations and usefulness of ABC system for decision-making purpose are also discussed.