Question

16) Which costing reduces the wastage in production ?[Provide detail explanation and type your answer and do not copy the answer from chegg study ]

Answer 1

Activity based costing (ABC) reduces the production wastage. ABC costing was developed to overcome the shortcomings experienced by the traditional method. Instead of only one cost driver such as machine hours, ABC applies will use multiple cost drivers for allocating the manufacturer's indirect costs. It helps in reducing the costs and eliminating the wastage by providing reliable information on the opportunities available for the cost reduction. This method assists the management on focusing the forces on value adding activities and elimination or or minimizing of the non-value adding activities. It identifies the processes which are not efficient and target their improvements. Moreover discovers the processes which have unnecessary and wasted costs

ABC system provides the cost information system, that helps the managers to set better priorities and assists them in monitoring and reducing the costs of correction on error activities. Activities that are vital and important for execution of the tasks in the project right from the inception will be tagged as effort on value-adding. Similarly the non-value- adding such as idle time and rework will be tagged and tracked by the system. Therefore it helps to reduce idle time, thereby enhancing productivity and decreasing the wastage cost