How does activity-based costing differ from the traditional costing approach?
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The traditional costing approach typically uses allocation bases that are measures of production volume eg direct labor hours direct labor cost or machine hours Also few cost pools are used under the traditional approach eg one or two cost pools ABC focuses on major activities that cause overhead costs to be incurred Many of these activities are not related to production volume Cost pools are formed for each major activity and costs are assigned to products using an allocation base ...View the full answer
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