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  Objectives of Activity Based Costing

Objectives of Activity Based Costing

The objectives of Activity Based Costing are explained below.

Ø   To eliminate the distortions in computation of total costs as seen in the conventional costing system and bring more correctness in the computation of costs of products and services.

Ø   To assist in decision making through correctly computing the costs of products and services.

Ø   To make out several activities in the production process and further recognize the value adding activities.

Ø   To distribute overheads on the base of activities.

Ø   To focus on high cost activities.

Ø   To make out the opportunities for enhancement and reduction of costs.

Ø   To eliminate non value adding activities.

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