Question

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

Answer 1

First of All, Let Us Briefly cover what is Activity Based Costing

Activity Based Costing : in simple terms It is The Process of Identifying the Activities Involved in the processing of a good or service (Called as cost centers) and assigning the costs based on the level of activity required to process the goods or services

Activity Based Costing (ABC) benefits to customers :

1. Improvement or Betterment of Quality in Goods/Services: Activity based costing Helps The Management to identify the cost drivers, which in turn lead to better management of resources in the resource allocation process to the identified cost centers/drivers thus it makes the products/services come out with more quality as necessary cost centers/drivers get appropriate resources by eliminating unwanted resource allocation over the common pool of activities.

2. Better Costs : In Activity based costing, since the costs are allocated to cost centers/drivers in the processing activity, the entire production chain can be monitored and unwanted costs will definitely get eliminated which in turn will benefit the customer through better pricing