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When the company apply the Activity Based Cost , dose it use the same unit cost generated by ABC in the annual report?
Welcome to the General forum that I look after – please note that I have deleted your duplicate post on another forum as cross-posting should generally be avoided.
In answer to your question, it is unlikely. Inventory valuation (which affects cost of sales and hence gross profit) in financial reports should be actual cost – or approximate actual cost using methods permitted by the financial reporting framework – under IFRS this would be IAS 2 Inventories. For example, standard cost is permitted as long as this is kept up-to-date.
If ABC includes non-production costs, it cannot comply with IAS 2.
In a similar vein, management may use marginal cost in management accounts – for decision-making – but production overheads would have to be included for financial reporting purposes.
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