Question

How do customers benefit from better accounting systems of businesses such as Activity Based Costing (ABC)

Answer 1

Activity Based Costing as a perspective of activity values ​​and monitoring, which includes finding out how much resources are consumed and costing the final output. Resources are selected for processing and activities for valuables and services. The latter costs are used to spend activity based on the drivers output.

Activity-based costing provides a more unparalleled cost of production and service costs, so making the most accurate pricing decisions is easier. It enhances the understanding of overheads and cost drivers, making costly goods and activities that add up for free. ABC effectively enables the challenge of operating costs to find better ways of removing overheads. It also enables improved income and profitability interpretation of consumers.

The first thing a company needs to do when using ABC is to create a team that will be responsible for finding out what actions are important in customer service questions. This methodology should include other guides, including technology and human resources in various areas of the company.

Thus, only large business firms appear to be involved in activity-based spending. ABC has found success in many industries, such as big companies, hospitals, insurance companies. But activity-based costs appear to be more successfully completed when used by larger companies rather than smaller ones. That way, companies that are only in certain products and markets do not have to get the same benefits of pricing based on the same business activities as customers working on different products and services. Even so, it usually takes a short period of time for a small project to establish activity-based costs for management.