Question

Explain three (3) benefits in using Activity-based costing system for a manufacturing company.

Answer 1

Q. Benefits of Activity based costing System

• Helps in taking quality Decisions
• Proper Pricing Policy
• Value Addition and Better Performance

3) Value Addition and Better Performance: - There are value adding and non-value adding activities. Activity Based Costing helps the management to focust on value adding activities, and as also helps to compare the costs of each activity with one another to find the activities which are to be eliminated or improved for better performance.

and cebich This is a technique essed to analyse manage business costs. This is a cost management technique measures the cost and performance of Activities, resources and the objects arhich consumes them in order to generate more accurate and meaningful information for Decision Making. Benefits:- 11 Helps in taking Quality Decision: - As it is only cuorking on activities helps management in taking quality decisions by knowing the nature of each activity. and there by secluce costs by getting meaningful informations from this. It also helps in taking decisions regarding manufaduring product on sub corstracting the same. 2) Proper Pricing Policy: - Since the relationship between be properly understood by using Activity Based Costing, accurate allocation of costs to various produds is possible. This helps in peopes pricing of Products costs and it's causes can