The difference between activity-based costing and traditional costing

The difference between them is that the cost allocation method is different, the cost tracking is different and the application scope is different.

1. Different cost allocation methods: The traditional cost method adopts the total allocation method of departments or product lines, while the activity-based costing method allocates the cost to each specific operation or task to more accurately reflect the actual cost of each operation.

2. Different cost tracking: Activity-based costing tracks the direct and indirect costs of each activity, including labor, materials and manufacturing expenses, so as to better understand the cost composition of each activity. The traditional cost method may only track all direct costs and part of indirect costs.

3. Different scope of application: Activity-based costing is applicable to situations where there are many different operations or tasks in the production process, such as customized production and mass production. Traditional cost method is more suitable for mass production in continuous production process.