Question

what is the difference between actively cost accounting versus process product cost

Answer 1

Process product cost accounting, accumulates costs under each manufacturing process and the costs so accumulated are then assigned to the different products on the basis of a suitable base, which may be machine hours, direct labor houirect labor cost, etc. The processes so identified, are broad cost pools and are not many in number.

In contrast, under activity based costing, the costs are first accumulated under various activities within each process and a base for assignment of costs, called activity driver, is selected. Activity rates are then computed for each activity and costs are assigned to different products on the basis of their consumption of the activity driver.

Thus, the activity based costing system has more number of cost pools (each with a different cost driver), than the process costing system, which usually has fewer cost pools. Hence, the activity based costing system provides more rational cost assignment, leading to better decisions and cost control.