Briefly explain the concepts of Absorption costing and Activity Based Costing. Describe the implications for a Company if they decide to switch from Absorption costing to Activity Based costing and evaluate whether you believe the additional costs of Activity Based Costing outweigh any potential benefits
Briefly explain the concepts of Absorption costing and Activity Based Costing. Describe
the implications for a Company if they decide to switch from Absorption costing to Activity
Based costing and evaluate whether you believe the additional costs of Activity Based Costing
outweigh any potential benefits
Understanding ‘Cost Assignment’ is a key aim of the IDMA001 Management Accounting syllabi.
Absorption and Activity Based Costing is a corner stone to understanding cost assignment in
the context of management accounting techniques.
The topic is very well covered in standard intermediate management accounting texts and
there is a plethora of articles on the subject in academic, professional and business journals
and internet sites.
Students will find little difficulty in sourcing three or four relevant articles on the topic to
Supplement material from their standard texts.
Students should avoid sites that offer ‘standard answers’ to the question – the use of such
sites will gain the student no credit.
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