What are the different cost allocation methods used in accounting?

What are the different cost allocation methods used in accounting?

There are several cost allocation methods, including direct allocation, step-down allocation, and activity-based costing. Would you like to know more about any specific method?

Can you explain activity-based costing?

Activity-based costing (ABC) assigns costs to products based on the activities required to produce them. It provides more accurate cost information by focusing on the actual consumption of resources.

What are the benefits of using ABC over traditional methods?

The benefits of ABC include more accurate product costing, better insight into overhead costs, and improved decision-making regarding pricing and product mix.

Are there any drawbacks to using activity-based costing?

Yes, some drawbacks include its complexity, higher implementation costs, and the need for detailed data collection, which can be time-consuming.