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What are the advantages of Activity based budgeting over an approach where cost of each activity is allocated on basis of cogs ????
What exactly does allocation on basis of cogs means ????
I think its trying to say – what are the advantages of of Activity Based Budgeting over traditional standard costing and budgeting methods.
Cogs means cost of goods sold – and I think its referring to how absorption costing will apply the overheads at a pre-determined OAR and shares the indirect costs over the production volume – whereas ABC costing (which is needed for Activity Based Budgeting assigns the cost to activities and allocates to the units in the proportion that they are responsible for the costs)
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