Traditional Costing Method

Costing systems helps the organizations to determine how much the product cost related to the revenue it generates. There are two famous costing systems used in business they are called traditional costing method and activity-based costing which is also known as the (ABC METHOD) . There are significant differences between the ABC method and the traditional method which have been identified by many other relevant studies. In the case of traditional method there is only one way which is direct labor cost. On the other hand the ABC method estimate the cost so, the ABC method goes with the specific way. In terms of cost there are to ways the company evaluate the costs with either its overestimated or undervalued products. The differences between

First thing to achieve cost calculation according to the system was made in the U.S. Thus a system called “Activity Based Costing” has emerged. The main objectives of the ABC method are, highlighting as directly as possible the activities of the company to obtain value of the products and services. Second, analysing the activities showing the nature of activates, the place of the main causes that determine the increase of resources consumed. There are 3 cost drivers for each type of activity. One, factors of consumption of resources, these drivers are directly relation to the amount of resources consumed and by using them, this consumption is accurately measured. Second, measures of the work performed for each activity, in those areas it is not possible to use factors of consumption of resources. Last but not least, activity triggers, they allow describing the business processes and their use makes possible to understand the links between

Activity Based Cost method made to detect and prevent any manipulating financial errors from the real costs. Hospitals use Activity Based Cost to analyze two main factors: the first one is cost element and it is (a directly measurable unit of cost, such as the cost of an item) and the second factor is cost driver (a directly measurable feature of the service, such as how often the item is used) Activity Based Cost method consider a better option than the traditional method, be cause of the new specialize and new techniques and it can understand the real costs that has ben put into the service, and it can also reduce the risks of being fraud because you own the efficient financial reports by then you can feel more safe. Activity Based Costing can help the companies to oversees future expectations by developing and creating a plan to see the