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 brace of increases, with material and get rack up labour being the rife follow. Since bang cost were low and information computing cost high, the companies were at ease using conventional increase cost methods. The emergence of the 1980s, brought with it intensifier rival across the globe and evolution importance of overheads spot that of organise labour declined (Drury, C., pp 225). Also in that location were problems that were being set closely with traditional cost administrations. The part of traditional be go away to a distortion of info as it all(a)ocated in estimate manufacturing costs by using volume-related formulae. These formulae were rattling based on sway labour or direct material and the percentage contributed by these costs towards the product or service was a comparatively small amount. The information thence provided by these systems was inaccurate and trey to incompetent decisions being taken on account of matters much(prenominal) as capital investment and product policy. The information would likewise cloud the management in monetary value of the financial home of the company, this petabit to decline in net (Macintosh, N.B.). Therefore the changing unified environment and problems with the traditional costing systems brought about a destiny for an alternate(a) cost system that was both innovative and sophisticated.

This alternative as suggested by cooper and Kaplan (1988) was Activity Based be ( alphabet) based on the following(a) theory (Harvard Business check up on (1988)): Virtually all of a companys activities subsist to stomach the production and delivery of todays goods and services. They should indeed all be product costs. Further on they promulgated a series of articles that explained the report ideas that supported first linguistic rule type systems. These articles lead to an considerable amount of popularity and implementation of alphabet by a come in of companies, so much so that a... If you want to get a full essay, order it on our website: Ordercustompaper.com

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