Abstract:
This article examines the characteristics, advantages, and disadvantages of each of the traditional costing systems, traditional activity-based costing, time-driven activity-based costing, and pragmatic activity-based costing, while explaining the reasons for bias toward each of these costing systems. In an effort to improve the traditional activity-based costing model, Kaplan and Anderson (2004) succeeded in creating a simplified model prior to the implementation of the traditional activity-based costing model called time-driven activity-based costing. Despite its numerous advantages, this model's specific disadvantages led researchers toward other costing models, including pragmatic activity-based costing. Nevertheless, the usefulness of each system must be determined based on its advantages and disadvantages under different conditions. Furthermore, no costing system is perfect and changes over time according to circumstances.
Machine summary:
The Evolutionary Process of Product and Service Costing Dr. Seyed Hossein Sajjadi Professor of Accounting, Shahid Beheshti University Hamed Anari Ghareghashlaghi © Master's Student in Management Accounting, Shahid Beheshti University Mohammad Ibrahim Babaei Varnousfadrani Master's Student in Management Accounting, Shahid Beheshti University (Received: March 2, 2019; Accepted: June 25, 2019) This article examines the characteristics, advantages, and disadvantages of each of the traditional costing systems, traditional activity-based costing, time-driven activity-based costing, and practical activity-based costing, along with explaining the reasons for bias toward each of these costing systems.
In today's world, with advancements in production technology and the increasing share of indirect production costs in total production costs, alongside the decreasing share of direct production costs (direct materials and labor), traditional costing systems based on activity volume are no longer responsive to managers' information needs for various types of decision-making, especially product pricing and formulating organizational strategies.
In summary, the following factors can be listed in the movement from traditional costing toward activity-based costing [4]: Innovative changes that occurred in the world to introduce modern technology, intelligent, expert, and flexible information systems, and new production solutions in various countries, especially in Japan.
And finally, the absorbed cost of committed resources is obtained through the following equation: Standard price of resources used × Standard resources used × Work done = Cost of flexible resources used Step Eight; Calculating the quantity variance of consumed resources In this step, the positive or negative performance of production managers is measured by comparing the flexible budget with the actual resources used and determining whether the resulting variance is favorable or unfavorable.
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