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Dear, Mr. Moffat,
In general, is using ABC to calculate overhead always results in less overhead cost than traditional costing method?
Note:
Please give an example for your answer.Best Regards.
No – total overheads are the same whatever method of charging the overheads to individual products is used. What does change is the overhead per unit for each individual product.
However, using ABC does force the company to examine what is causing the overheads to be incurred, and this can lead to greater efficiency and cost savings.
I explain all of this in my free lectures on ABC – with examples – and you cannot expect me to type out all my lectures here 🙂
The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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