How can I choose the best model based on activity?

The

activity -based cost -based model uses activities and drivers to apply overhead costs for produced goods. Companies may believe that this method is better than other methods of applying directorial costs, leading to the popularity of the use of a model based on activities. To select this model, the company should look at any activity that adds the cost of the production process and defines the best cost drivers that work in this system, together with the ability to easily transfer information to the Management Accounting Department. This process may include other specific measures or reviews because each company has slightly different manufacturing processes. Owners and executives can be individuals who attract the trigger when choosing this cost model.

In the production department, usually the entire production process usually creates. Several examples of production activities include raw material refinement, separate materials in specificGroups, transformation of raw materials to goods and completion of products for packaging. The number of activities in the production department may change the decision to select a model based on activities. In some cases, the company can divide each main activity into even smaller activities. This process helps to define which cost -based cost -based model will be best for society.

Other considerations for implementing the cost -based cost -based model are the cost drivers associated with each activity. The cost driver is the main accounting tool that uses the cost of manufacturing activities on the goods produced. If there is no sufficient cost driver in activity, then the cost model suffers due to lack of continuity. Standard cost drivers include working hours, machine clocks or square feet used for production activities. Oh can be used by drivers of cost even if the accountant has to careReview these other drivers to make sure they represent the exact cost of cost.

Part of any cost of the cost is the ability to transfer information from one department to another, with the final receiving department being an accounting office. Manager's accountant must ensure that an activity -based cost -based model is able to correctly convert information through the production department and cost accounting system. Defective information can lead to poor application of the cost of produced goods. This data is necessary to measure the efficiency and efficiency of the production process. This data transmission process should also be an important part of the selection of activities based on activities.