Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 19

How does the analysis of overhead variances differ for companies using a traditional cost system versus an ABC system?

Step 1 of 2

Analysis of variances using traditional costing system and Activity Based Costing (ABC) differs one another because of the activity measure used in each method. However, in both the methods, direct expenses like direct material and direct labor will be same. The only change is in the usage of indirect (overhead) expenses.