Presentation on activity based costing

Name ankit sharma Roll no. 11

• Activity based costing is that costing in which cost are first traced to activities then to product. .Meaning of activity based costing • The collection of financial and operational performance information tracing the significant activities of the firm to product cost.

• To identify the opportunities for improvement. . To identify various activities of production. To help in decision making. • To eliminate non value adding activities. To distribute overhead on the basis of activity.Objectives of activity based costing • • • • To remove the distortion in computation.

• Activity cost pool. • Conclusion. • Cost drivers. • Study of the activities involved.Working of activity based costing • Understand and analyzing manufacturing process. • Identification of costs with products. .

Classification of activities in manufacturing organization • • • • Unit level activities Batch level activities Product level activities Facility level activities .

Difficult to attribute costs. High level of time and money required. Only trained professional can do it. .Limitations of activity based costing • • • • • • Complex system. Beneficial only for big organization. Support of top management required.

Importance of activity based costing • • • • • • Accurate and reliability Realistic product cost Help to reduce cost Help to decision making Optimum utilization of resources Reduce wastage .

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