Question

Describe the Activity-Based Costing method in the context of:

a) Characteristics, features and challenges; and

b) Application within service industries

Answer 1

1) its is basically a new term develop to find out cost.teh basis feacture of abc is to focus on various activites as fundamental odjectives , it uses various activites of organisation as the basis for calculating cost of product and services abc is a costing system whch focus on activites perfrom to prodcue the final product abc is the cosing method in which costs are first trace to acitviites and tnen to products

B) many compmanies has face various problems coming up for decent cost accuotn system becuae they have been modeling them after sytems foundin manfucaturing firms.trhe problemw with this that manufacturing frims place emphasis on valuing the inventory ,whcih serrvie firms do not have ,and use standard costs calcuated for direct mateials and labour, direct mateials and direct labour are major cost categroies in service firms and it hasw to find out standard costs in a service setting they do not have any toosl which woud enable tjhem to trace the proper costs theus enableing them to calculate exact profitablity of prodcut

abc is a tool which help to trace cost and help in calculaitng exact profitablityy of products