In traditional costing,
costs are assigned,
By volume or hours,
with overheads aligned.
A simpler method,
yet less precise,
Allocating expenses,
with a generalized device.
From factory overheads to indirect costs,
Allocated broadly,
with nuances lost.
It serves many well,
though it may not be,
The most accurate method for costing you see.!
Traditional Costing:
- Basis of Allocation: Volume-based measures like machine hours or labor hours.
- Accuracy: Less accurate for complex processes.
- Cost Drivers: Generalized, often leading to over or under-costing.
- Suitability: Better for simple production environments.
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