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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