Activity-Based Costing vs. Traditional Costing for Small Businesses
Do you think all small businesses like an ice cream shop would benefit from activity-based costing (ABC) or should some small businesses use traditional costing? Be sure to include in your discussion a specific, relevant example of why you think the method you selected is helpful to managers and would benefit the company financially.
Activity-Based Costing vs. Traditional Costing for Small Businesses
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Activity-Based Costing vs. Traditional Costing for Small Businesses
Organizations should use either Activity-Based Costing (ABC) or traditional costing, depending on the complexity of the activities and the needed degree of cost accuracy. Smaller organizations with less complex operations may be OK with traditional costing methods, while larger companies with more varied product lines and resource usage may benefit more from ABC. Small businesses, like ice cream parlors, may find the choice between ABC and traditional costing to impact their financial management and decision-making significantly.
The ABC method of cost allocation allocates costs to activities before assigning them to products