How resilient is the activity-based cost system? / Wee Shu Hui

Wee, Shu Hui (1996) How resilient is the activity-based cost system? / Wee Shu Hui. Jurnal Akademik UiTM Sarawak. pp. 49-54. ISSN 0128-2635


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The whole issue of cost allocation or absorption has always generated a lot of interest amongst accountants probably because no absoluteness of costs has emerged as yet. Would "true" costs ever surface? Historically, textbooks have emphasised methods for allocating costs to departments and products. Fixed costs have been divided by some standard measure to obtain a fixed cost unit (even though fixed costs are supposed to be "fixed"). Joint costs and other common costs have been allocated by some forms of reasonable but arbitrary measures. Miller and Vollmann (1985) have identified "overhead creep" in this present age of high technology. Previously, the ratios of overhead costs to direct labour costs were 100% to 200% or so but now the rates can well escalate to over 1000%. This arises because a small change in labour can cause a substantial change in the expected overhead. Miller and Vollmann (1985) stressed the need to understand and manage costs in the "hidden factory" rather than just knowing the mechanics of allocating overhead. The dichotomy of costs into fixed and variable provides an extremely useful and important basic concept in cost accounting. The definitions of fixed and variable costs are always made with respect to a specific time period. Ultimately, all costs become variable in the long run.

Item Type: Article
Uncontrolled Keywords: Resilient; Activity-based cost system; Joint costs
Subjects: H Social Sciences > HD Industries. Land use. Labor > Management. Industrial Management
H Social Sciences > HD Industries. Land use. Labor > Business analysts
Divisions: Universiti Teknologi MARA, Sarawak
Depositing User: Staf Pendigitalan 5
Date Deposited: 08 May 2017 02:30
Last Modified: 08 May 2017 02:30

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