7.7: Introduction to Cost Accounting Methods
What you’ll learn to do: Examine the benefits and limitations of both cost accounting methods
Traditional cost accounting and activity based absorption based costing vary in several ways, primarily in the complexity of implementation. We will discuss the pros and cons of both methods, along with situations where one may be more reflective of the actual allocation that the other.
Each business needs to decide which system will work best for them, based on analysis of their product, activities and systems. Let’s take a look at these two costing methods.