Benefits of Activity Based Cost Systems

The best way to if obtaining Benefits of Activity-Based Cost Systems  is to use in combination with the In the course of the last several years many experts who specialise in casting all over the world expressed grave displeasure with the old method of cost and management accounting processes.  They maintain that the conventional established cost accounting methods do not give the correct cost of activities nor do these methods offer comprehensive and meticulous facts or knowledge to managers, which could lead to loss-making decisions by not taking into account the fact that complicated products eat up greater resources that products that are simple to manufacture

Activity Based Cost systems were introduced to fill the requirements for precise information regarding the expenditure of assets that were needed for costing individual products, services and clients. ABC systems also provided the capability for roundabout and sustenance to be utilized first for activities and processes and later to products, services and clients.  This gave managers a better overview of the financial side of their manufacturing activities.  Furthermore, ABC has enabled the development and making of business decisions and organizing the business in a more superior manner This also proved to be a more accommodating and contemporary support system which could take care of problems of expenses and at the same time provide planning information.

Activity Based Cost systems have been viewed with great interest from scholars and accountants since its appearance in the later part of the 1980’s The development of ACB came about to remedy issues connected conventional cost management systems, which do not possess the capability to establish authentic production and service costs, or provide accurate information for effective decisions. This leaves the managers to make decisions which are based on inaccurate data, especially companies offering various products or services. Activity based accounting originated in the United States and is the result of manifold academic and workable studies.  It is now thought to be the best idea in cost calculation accounting.

Peter Drucker was of the view in 1963 that the features of conventional cost calculation methods due to relevancy leads to common financial assistance between products and their actual costs. This was later supported in the 1970’s by through various articles and published works. During this period The Consortium of Advanced Management, International also played an important part in the studies playing an influential role in researching and making official the values that are now known as Activity Based Costing Systems

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