Traditional Absorption v Activity Based costing

F5 Revision lectures


  1. avatar says

    I really appriciate your lecture really helpful, just have one question when discussing the results of ABC in this example how come the Y has greater overheads e.g meterial handling costs its in fact giving only 25 units per order compare to x is 125 so how does that make cost overchaged.

    • Profile photo of John Moffat says

      Because Y is ordering in smaller quantities they are placing more order than they would need to place if they were ordering in bigger quantities.
      Therefore it is only sensible that they should be charged with more overhead per unit.

      (PS If you want me to answer a question then please post it in the Ask the Tutor F5 Forum – it is not possible for me always to read all the comments under lectures :-) )

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