The concept of activity based costing is applicable to the
accounting, finance and the costing departments of the company. In most of the
business cases activity based modal is used as a full scope however in some
cases it an be used as partial scope. One of the most beneficial application of
the activity based costing modal is that it is used to identify inefficient
products, departments and operations. With the help of this modal a company can
allocate more resources to the departments, products and operations that prove
to be profitable to the business. Another useful aspect of the activity based
costing modal is that it is used to control the costs at some pre-production
level as well as at the department level. It intelligently identifies the extra
and unnecessary costs and helps the organization to eliminate those costs. With
the help of activity based costing modal the upper management can fix the price
of a product or service in accordance with any analytical decision.
Other aspects of the usefulness of activity based costing
technique are that it ensures a better management of cost and resource
allocation. It also helps in measuring the budgeting and the performance level
of an organization. Activity based modal is a mew innovation and helps in
calculating the costs more accurately. With the help of this modal an
organization may ensure the profitability of a product or a service. The modal
also helps in justifying the resource allocations in new projects by using the
new technologies. Activity based costing also aims to manufacture a better
product by enhancing process design and hence it ensures product quality as
well. With the assistance of activity based costing modal a firm is able to
handle competition and cop competing firms with more sensibility.
Another factor that goes in the favor of the implementation
of activity based costing is that it creates cost conscious behavior among the
employees as a result it triggers behavioral incentives among the employees. The
modal also responds to the increase the over heads at any level of the
production. Moreover it also supports other sort of management innovative
techniques such as JIT and TQM.
