Explain traditional costing system and activity based costing (ABC) system and effectiveness of these twodifferent costing system.

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Difference between traditional costing system and activity bases costing (ABC) system
Table of Contents
Introduction    3
Traditional method of costing    4
Benefits and limitations of the traditional costing system    4
Activity Based Costing (ABC) method of costing    5
Advantages and disadvantages of the ABC system    5
Difference between both the costing systems    5
Conclusion    8
References    9
Introduction
The cost accounting system or the product costing system is basically a mechanism that is adopted by the organizations for the estimation of the product’s cost and for the purpose of profitability analysis, cost control and inventory valuation There are different costing systems which an organization can adopt, for example, traditional costing system, activity based costing system, process costing system etc. The essay highlights the importance of the two different costing systems i.e. the traditional costing system and the ABC system of costing and the difference between these two costing methods.
Traditional method of costing
The traditional costing system is identified as the apportionment of the factory overhead to the goods on the basis of volume produced and the amount of resources involved in the product. Thus, under this system manufacturing overhead i.e. the indirect manufacturing cost is allocated to the products on the basis of metrics such as productive hours of machine or the direct labor hours. With the sophistication of the manufacturing function, the overhead costs related to manufacturing overhead generally increase while there is a significant reduction in the productive machine hours (Dale & Plunkett, 2017). Hence, the machine hours or the direct hours for labor are considered to be the root cause for the manufacturing expenses. The activity based costing was developed in order to meet out the shortcomings and limitations of the traditional costing system.
Benefits and limitations of the traditional costing system
One of the major benefits is that this method is quite simple and cost effective in comparison to the ABC system. The method is still widely used among different organizations as detailed and analytical knowledge regarding costing is not required under this method and any individual can easily implement this system within the organization. The shortcomings that are identified within this...