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- This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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- July 24, 2016 at 9:20 pm #328692
Sir can you plz explain the following things for me
1) If ABC provides accurate and reliable cost information then why it is not a relevent cost for decision making purpose?????
2)”too great proportion of overhead to high volume of product,which causes relatively little diversity and hence use fewer support service”
in this above line what does it mean by “which causes relatively little diversity” and how does it cause this diversity???????
July 24, 2016 at 9:34 pm #3286961. It depends on the decision being made. If it is a pricing decision then of course it is a relevant cost (as I explain in my free lectures on ABC, which I assume you have watched).
However, for relevant costing decisions relating to one-off projects then it is not relevant because we are only concerned with incremental costs. Since ABC is concerned with charging the fixed costs between products for profit purposes, the total fixed costs will not (by definition) change as a result of an extra one-off project.
Again, I explain this in my lectures on relevant costing.2. It depends on the context of the sentence that you have quoted. I would guess it is relating to traditional absorption costing, but you have not written the context.
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