Activity Based Costing System Project Essay

1333 Words Dec 23rd, 2014 6 Pages
Activity Based Costing System

Monica Meneses

Patten University

Activity Based Costing System 1

Activity based costing is an accounting method that identifies the activities that a business performs, and then assigns indirect costs to products. An activity based costing (ABC) system recognizes the relationship between costs, activities and products, and through this relationship assigns indirect costs to products less arbitrarily than traditional methods. Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries are sometimes difficult to assign to a particular product produced. For this reason this method is more popular in the manufacturing sector. In this essay we will be evaluating the overhead allocation methods that the Omega Company is currently utilizing to run their potato chips and snack company. By citing the advantages and disadvantages of both the traditional and activity based costing methods it will be determined which one will be a better fit for Omega Company’s needs.

Activity Based Costing System…

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