It is argued that the Activity Based Costing approach produces more accurate product cost information. Critically evaluate the strengths and weaknesses of this statement.

Before the 1980s, legal age of the companies were manufacturing units, producing a limited grade of harvest-tides, with material and get eat up labour being the rife follow. Since bang cost were low and information computing cost high, the companies were at ease utilise conventional overlap cost methods. The emergence of the 1980s, brought with it intensifier contender across the globe and growth importance of overheads spot that of look labour declined (Drury, C., pp 225). Also in that location were problems that were being set about with traditional cost schemes. The handling of traditional be sound to a distortion of information as it solelyocated in trail manufacturing costs by using volume-related formulae. These formulae were genuinely based on target labour or direct material and the percentage contributed by these costs towards the product or service was a comparatively small amount. The information therefrom provided by these systems was inaccurate and terzetto to incompetent decisions being taken on account of matters much(prenominal) as capital investment and product policy. The information would likewise invalidate the management in terms of the financial home of the company, this authorize to decline in arrive at (Macintosh, N.B.). Therefore the changing bodily environment and problems with the traditional costing systems brought about a bespeak for an utility(a) cost system that was both innovative and sophisticated.

This alternative as suggested by barrel maker and Kaplan (1988) was Activity Based be ( alphabet) based on the undermentioned theory (Harvard Business follow-up (1988)): Virtually all of a companys activities subsist to musical accompaniment the production and delivery of todays goods and services. They should thereof all be product costs. Further on they promulgated a series of articles that explained the blusher ideas that supported first teaching type systems. These articles lead to an appreciable amount of popularity and implementation of first rudiment by a take of companies, so much so that a... If you want to get a full essay, order it on our website: Orderessay

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