04-02-2006, 06:20 PM
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in simple words, the basic difference b/w tradditional costing n ABC costing is tht in conventional costing, FOH is calculated based on some FOH-rates tht r computed n then applied blindly to entire production.
in ABC costing, the philosophy is tht costs result from various activities . n each activity incurs different amount of FOH. so each product n activity shud get "its" portion of FOH.
it helps mgmt to re-engineer the processes n procedures n hlps to control n manage costs in better way.
i hope u got the core concept.
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in simple words, the basic difference b/w tradditional costing n ABC costing is tht in conventional costing, FOH is calculated based on some FOH-rates tht r computed n then applied blindly to entire production.
in ABC costing, the philosophy is tht costs result from various activities . n each activity incurs different amount of FOH. so each product n activity shud get "its" portion of FOH.
it helps mgmt to re-engineer the processes n procedures n hlps to control n manage costs in better way.
i hope u got the core concept.
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