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Create a 7 pages page paper that discusses stock control. Measurement of cost by traditional costing method and ABC costing method are greatly different. ABC allocates the activity costs into products
Create a 7 pages page paper that discusses stock control. Measurement of cost by traditional costing method and ABC costing method are greatly different. ABC allocates the activity costs into products by cost drivers, while traditional costing method uses quantity drivers to allocate costs. Since the use of the traditional costing method was not avoided of products loss, we may as well say then that its continual use would be a wrong economic decision.
It is impossible to get correct activity information of each activity and the activity channeled towards production by using traditional costing method, while this can be achieved easily and accurately by ABC method. With the use of ABC, Vauxhall could now analyze which activity is tends towards loss of products, in order to discuss the possibility of reduction of such activities.
The product loss, measured by traditional costing method, was not encountered by ABC method since ABC could accurately allocate cost information.
