Question

example of an s&p 500 company that uses activity-based costing, overall review of this company, advantages, and disadvantages specific with the firm.

Answer 1

Answer:

Activity based costing:

Activity based costing is a costing strategy or model that is utilized to recognize and distribute fabricating overhead expense to a particular item which really utilizes it. This technique helps deciding the real expense of item by dispensing the overhead expenses and exercises all the more accurately to the item. This is commonly utilized by the organizations which have numerous product offerings and have a larger amount of overhead expenses.

Advantages of Activity based costing:  

• Activity based costing gives better comprehension of overhead expense related with a specific item, when organization is creating various items.
• Since ABC's principle center is around the linkages of expenses and exercises with its motivation and impacts with regards to creation, it is increasingly precise in assurance of produce cost.
• This aides in increasingly proper evaluating of the item as overhead expense are allotted according to its importance to a particular item.
• Since Activity based costing isolates the overhead cost dependent on items produced, it empowers organizations to control overhead expenses as linkages among expense and exercises are plainly distinguished.
• The last expense of an item is very clear and straightforward as Activity based costing gives cost of every action performed to create an item bringing about expense.
• Activity based costing makes wastages and non-esteem added exercises plainly noticeable because of the reasonable recognizable proof of expense and exercises.

Disadvantages of Activity based costing:

• Implementation of ABC is an unpredictable venture and it requires a great deal of endeavors and cost.
• It can't be utilized for those organizations which doesn't have higher overhead expenses.
• Determination of cost drivers are difficult as you can only with significant effort decide the esteem expansion or non-esteem expansion of a movement for an item.
• It isn't anything but difficult to recognize the general exercises that impacts the expense. In this way, here and there it turns out to be very hard to isolate overhead expense and requires bunches of endeavors.