Higher Cost Accuracy: ABC provides a more accurate view of costs by identifying the specific expenses of each activity involved in producing a product or delivering a service. This is more precise than traditional costing methods, which often allocate costs broadly.
Efficient Resource Management: Knowing the cost of each activity helps organizations identify areas where resources may be overused, enabling optimization and reduction of waste.
More Accurate Pricing: With detailed cost information, companies can set product or service prices more accurately, improving competitiveness and ensuring better profit margins.
Supports Strategic Decision-Making: ABC provides detailed and accurate cost data that aid in decisions such as identifying unprofitable products or services, improving processes, or reducing costs.
Increases Productivity and Efficiency: By analyzing costs at the activity level, companies can identify and reduce non-value-adding activities, leading to improved processes and overall efficiency.
Better Cost Control and Management: ABC allows organizations to evaluate costs based on specific activities, making it easier to control and manage costs in each area.
ABC helps organizations understand how resources are used in manufacturing or service delivery processes, supporting strategic planning and enhancing competitiveness.
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