NATIONAL TECHNICAL UNIVERSITY OF UKRAINE “IGOR

SIKORSKY KYIV POLYTECHNIC INSTITUTE”

FACULTY OF BIOMEDICAL ENGINEERING
DEPARTMENT OF BIOMEDICAL ENGINEERING

Topic

«Using of the «АBС-players» system at the manufacturing enterprises

(advantages and disadvantages)»

Name:
Stefany Pineda

Group:
BM-73i

Checked by:

Professor assistant.
Eugenia Udovytska

Kyiv-2021
Using of the «АBС-players» system at the manufacturing enterprises
(advantages and disadvantages)

You may believe you have the actual cost of production for your products, but if
you're not using activity-based costing (ABC) methods, you probably don't and
may be making decisions based on incorrect information.

Activity-Based Costing

Activity-based costing is a costing technique for identifying a company's indirect

cost activities and assigning these expenses or careers that use these activities.

For many years, the most common method of allocating manufacturing overhead
was absorption-costing, also known as full costing. This method distributes the
entire manufacturing overhead evenly across the production volume of all
products. It does not take into account that certain products may be concerned for
more or fewer costs associated with specific activities. Activity-based costing,
abbreviated as ABC solves these problems.

Advantages of Activity-Based Costing

 Provides realistic manufacturing costs for specific products

 More accurately allocates manufacturing overhead to products and
processes that use the activity
 Identifies inefficient processes and targets for improvements
 More precisely determines product profit margins;
 Discovers which processes have unnecessary and wasted costs.
 Provides a better understanding and rationalization of manufacturing
overhead expenses.
Disadvantages of Activity-Based Costing

 Data collection and preparation take time.

 It costs more to collect and analyze information.
 Source data isn't always readily available from standard accounting reports.
 ABC reports do not always adhere to generally accepted accounting
principles and thus cannot be used for reporting purposes.
 Data produced by ABC may conflict with previously established managerial
performance standards based on traditional costing methods.
 May not be as effective for businesses where overhead is low in relation to
total operating costs.

ABC produces more accurate product costing by essentially converting broad

indirect costs into direct production costs. It calculates the costs of various
indirect costs and allocates them to the specific activities that use them.

Setting up an ABC system is time-consuming and costly to repair, but it provides

valuable information to management that can be used to improve process
productivity and enhance product profit margins